Thoughts on Economics 1

Thoughts on Economics

Vol. 22, No. 04

Some Guidelines on Zakatability of the Wealth and the Persons Subject to Zakat, the Procedure for Calculating Zakat

Prof. Dr. Abu Bakr Rafique *

Abstract

The paper aims at giving a brief guideline on those assets which are subject to payment of Zakat thereon and to discuss about the method for calculating the proportion of the wealth to be paid as Zakat and other prerequisites for being Zakat obligatory. The discussions include the issues like (i) Zakat is obligatory on whom (ii) The conditions which are to be fulfilled for being Zakat an obligatory duty. (iii) The assets on which Zakat is payable and (iv) What are the rate of Zakat on different Zakatable wealth.

Special effort has been made for highlighting the opinions of different scholars related to Zakatability of different items and rate of Zakat on them.

Among the new issues which have been discussed in this article are issues like Zakat on exploited goods, Zakat on shares, Bonds and salary income and the policy regarding EPF and exemption of the portion of debt from Zakatability. Three tables have been prepared separately at the end as examples of a statement of Zakat calculation, which may help the Zakat payers for calculating Zakat on different items.

Key words: Zakat, zakatability, nisab, wasaq, exploited wealth, exempts, basic needs

[1]1. The people who are subject to Zakat?

1.1 Zakat is payable only by a Muslim. None of the non-Muslims is a subject to payment of Zakat.

1.2 Zakat is payable on wealth regardless of the matter whether the person possessing this wealth

is an adult or a minor, sane or insane. And as such, Zakat is to be paid on the wealth of a minor and an insane also, subject to fulfilling other conditions. The guardian of the minor and the insane shall have to pay the Zakat on his wealth. It is due to the fact that Zakat is the right of the poor on the wealth, not on the owner himself. (1)

2. Under what condition Zakat is payable?

The following are the conditions for payment of Zakat:

2.1 The asset should be of growing nature (i.e. the wealth which has the potentiality for growth); such as money, livestock, properly, business commodity etc.

2.2 The Zakatable assets should be in excess of basic needs of the Zakat payer, like livelihood, clothing, abode, basic transportation, education, treatment of the dependents and also includes the professional apparatus of the incumbent, if he is a man of profession.

2.3 The excess amount must reach a certain level called nisab. However, the nisab of all sorts of wealth are not uniform, rather, different types of wealth has different nisabs.

2.4 One full lunar year should have passed on the excess amount in possession. However, this condition is not a general rule for all sorts of assets. For example in case of Zakat on minerals and crops Zakat is payable instantly, in case of salary, wages and professional income possessing for a duration of a year is not required. This condition is restricted to savings, livestock and commercial commodities only. (2)

2.5 Zakat is to be calculated excluding the debt payable during the period in question. For example: if the owner of the wealth is burdened with debt which is due to be paid during the year in question, and up-to an extent that upon payment of this amount the asset will be reduced to below the level of nisab then Zakat is not payable, likewise, if the amount is still in excess to nisab but reduced to a lesser amount, Zakat is payable on the net amount after deduction of the debt . This is the considered opinion of Dr. Al- Qaradawi. (3)

Note: One thing deserves to be drawn to the attention of those who want to understand the spirit of Shari`ah, that only those debts should be deductible that are considered “Debt by necessity”. Debts that occur due to our desire for leading luxurious life should not be deductible. Deducting such debts would result in a major injustice to the poor, and the needy will be deprived of even the basic necessities of life that we take for granted such as food, clothing, shelter, transportation and medical care. (4)

3. Zakatability of different kinds of Wealth.

3.1 Gold:

Gold is considered as one of the basic assets which are subject to Zakat. Zakat is payable on gold if it reaches upto the level of nisab. The nisab of gold is 20 Dinars according to the text of hadith, (85 grams according to modern assessment). If anyone possesses this amount of gold for a period of one year regardless of the matter whether it is in the form of jewelry or in the form of coins and currency or in solid form, she/he has to pay Zakat on this @ 2.5%. If the amount is less than 20 Dinars / 85 grams or reduced to below this level upon payment of debt, if any, then no Zakat is due on him/her.

According to Imam Ahmad, and Imam Shafi’, there is no Zakat on women’s jewelry ornaments. Dr. Yousuf al-Qaradawi also holds this opinion. He says that jewelery whether made of gold, silver, pearls or pr``ecious stones is to be exempted from Zakat, if they are within the customary limit, but if it reaches to the level of extravagance or are used to hoard wealth then it will be subject to Zakat. (5)

But according to Imam Abu Hanifa (R) Zakat is payable on gold if it reaches the limit of nisab (20 Dinars/85 grams) regardless of the matter whether it is found in the form of jewelery or any other form.

We think that this opinion is more close to the tradition of the Prophet (saw) and the spirit of Shari`ah also. Moreover, it is more beneficial for the poor.

Narrated on the authority of Ali (R) that the prophet (saw) is reported to have said:

“No Zakat upon you (i.e on the gold) until you possess 20 Dinars. When you possess 20 Dinars and a year is passed after that the half of a Dinar is to be paid, whatever it will be in addition to that Zakat will be payable proportionally and no Zakat is payable until a year completes on this”.(6)

Moreover, no authentic Hadith is available on exemption of jewelery from paying Zakat, even if it reaches the level of nisab, and that the level of extravagance which has been mentioned above is a vague term. It can only be identified if starts with an amount which is found to be in excess of 20 Dinars (85 grams.)

3.2 Silver:

The nisab of silver is identified as 200 dirhams (600 grams approximately). If anyone possesses 200 dirhams of silver, whether in the form of ornament or as coins, and one full lunar year passes away upon the owner, then he has to pay 5 dirhams (2.5%) as Zakat. The following Hadith of the Prophet (saw) may be mentioned as reference:

“Narrated on the authority of ‘Ali (R) that the Prophet (saw) is reported to have said:

“……… You pay the sadaqah on silver @ I dirham on every 40 dirhams, and no sadaqah is payable on 190 dirhams, but when it reaches 200 dirhams than 5 dirhams are payable.”(7)

Note: In case of possessing both gold and silver by anyone, nisab should be considered on each of them separately’ not jointly, because both are considered two different assets with different standards of nisab and value e.g. if a person possesses 75 grams of gold and 500 grams of silver s/he is not pay zakat on that. [Ref. Fiqh al-Sunnah. Vol. 1.P.299]

3.3 Cash Currency:

Money asset is also a Zakatable item according to majority of the Islamic scholars of all ages. Howover, there are some differences of opinion related to determining the nisab of money, whether it should be fixed up on the basis of silver or gold?

Al-Qaradiwi opines that the nisab of currency or money asset should be determined on the basis of gold. And as such, no Zakat on currency is payable unless it reaches the value of 85 grams of gold (i.e around Tk 350000/- in our local currency) (8). According to the majority of the jurists it should be determined on the basis of silver. And as such, if the amount of money reaches up to the price of 200 dirhams of silver 600 grams approximately, (which is around Tk. 60000 in our local currency) then Zakat is to be paid @ 2.5%. We think in the context of Bangladesh this opinion is nearer to the spirit of Islamic ShariÔah.

Money invested with others, with the objective of any business is also considered as cash: If that money draws some profit, the Zakat is payable on both the capital and the profit, otherwise it should be paid on the capital only, provided the amount reaches upto the level of nisab, and a whole year passes thereon.

3.4 Live stock :

Livestock animals are considered as Zakatable item. However, animal for personal use such as for eating, for riding and transportation are exempted from Zakat. Likewise, animals used for cultivation, pulling carts or carrying water are also excluded from Zakatabilty. The animals which are subject to Zakatability should be of such nature that they graze most of the year on natural grazing pasture, without providing them artificial food. Another condition is that one full lunar year is to be passed after reaching the number of live stock above the limit of minimum nisab.

Note: Considering the fact that Zakat on animals is not applicable in the context of Bangladesh, we have not given the details in this regard. However, the owners of Diary Firms shall have to pay Zakat on the total income minus the basic expenses @2.5%.

3.5 Merchandise and Inventory items:

All Scholars of Islamic Jurisprudence in the past and the contemporary period unanimously hold the opinion that merchandise and trading goods are Zakatable, provided it reaches up-to the level of nisab and a lunar year passes upon possessing of this wealth. Merchandise includes any item or property that are procured with the intention of resale, like foodstuff, clothing, cosmetics, medicine, sports and gift items, vehicles, spare parts of machineries, and even real estate (house or land), if these are prepared for the purpose of trading. (9)

In this context the following tradition may be quoted:

(a) “Samura ibn Jundub reported that the prophet (saw) used to give instruction to us to pay Zakat on what we had for sale.” (10)

(b) Abu ‘Amr ibn Hamas reported from his father that he said: “I used to sell leather and leather containers. Once “Umar ibn al Khattab passed by me and said: Pay the Sadaqa due on your property” I said: “O Commander of the Faithful, it is just leather”, He replied: “Evaluate it and then pay its due sadaqa.” (11)

Note: If the value of merchandise comes down below the level of nisab in the middle of the year, but recovers before the end of the year, this short absence of nisab will not affect the Zakatability of that assets. This is the opinion of Imam Abu Hanifa, and according to Imam Ahmad ibn Hanbal, If the asset decreases at any point of the year then the duration will be counted since the level of nisab is regained, the previous period will not be counted.(12)

3.6 Crops and Fruits:

The crops and fruits are also Zakatable like money, merchandise and live stock, The Zakatability on agricultural products is established by the commandment of Allah (swt). He says:

(i) “O you who believe! Spend of the good things which you have legally earned, and of that which you have produced from the earth for you.”Al-Quran (2:267)

In this verse the word ‘spend’ denotes to spend for the cause of Allah (swt) which is Zakat.

(ii) “And it is He, Who produces gardens trellised and unrealized, and date palms, and crops of different shape and taste, and olives and pomegranates similar (in kind) and different is taste. Eat of their fruit when they ripen, but pay the due thereof. …. (its Zakat as per Shari`ah rule) on the day of its harvest and waste not by extravagance . Verily He likes not al Musrifin (those waste by extravagance).” Al-Qur’an (6:12)

Among the agricultural products Zakat is payable on wheat, burley, dates

and raisin. This is based on the following tradition of the prophet (saw):

Narrated by Abu Burdah on the authority of Abu Musa (R) and MuÔaz ibn Jabal (R) that “the prophet (saw) sent them both to Yemen to teach the people about the religion; then commanded them for not to receive sadaqa (Zakat) except on these four kinds of products, wheat, burley , dates and raisin.” (13)

However, considering the similarity in nature the scholars have given their verdicts that paddy is also Zakatable like the above mentioned items due to close similarity in nature fulfilling some prerequisites. That it is also hoardable for longer period and considered as a stable food, none of the scholars is reported to have differed with this opinion. And as such, it has become a consencious of the scholars. (IjmaÔ)

However, there is a difference of opinion regarding the Zakatability of vegetables and fruits. Opinions of some of the jurists are given below:

(i) According to Hasan al-Basri and Sha`bi no Zakat is payable except those products which are specified in the text of hadith e.g. wheat, burley, corn, dates and raisin. As for other agricultural products there is no textual support for that. Imam Shawkaani comments that this is a just opinion.(14)

(ii) Imam Abu Hanifa holds the opinion that Zakat is payable on each and every item produced from the earth, regardless of the matter whether it is vegetables or other products. He quotes the following tradition of the prophet (saw).

“Which is watered by the sky Zakat is to pay @ one tenth of products.”

This is a general instruction. It includes all those products which are yielded from the land, here the objective is the outcome of cultivating the land. (15)

Among the contemporary scholars. Dr. Al-Qardawi also holds this opinion.

(iii) According to Imam Abu Yusuf and Muhammad, if the product of land can be stored naturally for a year, then Zakat is payable on that wheiher it can be measured or weighted. Accordingly all sorts of seeds, sugar and cotton also are included under the Zakatable items. But they did not opine in favour of Zakatability of the vegetables and fruits like water mellon, grapes, apple etc. (16)

(iv) Imam Malik and Shafi’i also hold the similar opinion. None of them opined in favour of Zakatability of fruits and vegetables.

(v) Imam Ahmad ibn Hanbal opinies that whatever is produced from the land, whether it is foodstuff or seeds, if it is storable then Zakat is to be paid on that, but no Zakat on all kinds of fruits which are not subject to be dried, nor on any sort of vegetables. (17)

(vi) According to Imam Navawi’s opinion, if the yields are obtained from trees like dates and raisin Zakat is payable and among the grains Zakat is payable on those which are storable and used as foodstuff. (e.g. wheat, paddy, burley, corn, etc. No Zakat is due on vegetables and fruits including olive. (18)

3.6.1 Nisab of Agricultural products:

The minimum nisab of agricultural products is five wasaq. This is based on a prophetic tradition which reads as follows:

“On less than five wasaqs (of product) there is no sadaqa.” (19)

“No Zakat on less than five wasaqs of dates or grains is payable.” (20)

Wasaq is a measure which was generally being used in Hijaz. The scholars opine that it is equivalent to 60 sa’s which is around 320 Lbs in weight. Thus 5 wasaqs will be equivalent to 1600 lbs. However, according to Dr. Yusuf al-Qaradawi 5 wasaqs are equivalent to 653 kilgograms. (21)

Imam Abu Hanifa and Mujahid hold the opinion that Zakat is payable on agricultural products whatever be the amount. But the considered view of the majority scholars is that no Zakat is due on less than 5 wasaqs of agricultural product, and it is to be paid on certain specific kinds of products only.

Zakat is 10% of the product if the land is watered by rain or by natural spring water throughout the period of crops or most of that, and 5% if it is watered by irrigation process, and 7.5% if the crops are produced through cocktail process. In this connection the following tradition of Prophet (saw) may be quoted: Narrated on the authority of Mu`adh ® that the Propet (saw) has said:

“Which is watered by showering from the sky or current of water, 10% is due, and which is watered by (artificial) irrigation 5% is due”. (22)

Note: In payment of Zakat on agricultural products there is no requirement for passage of a year. Rather the Zakat should be paid instantly at the time of harvesting the crops. There is no Zakat on the value of agricultural land unless it is possessed for the purpose of resale. In this situation it will be considered as trade and commercial commodity.

The Zakat on the crops is payable by the producer, not by the owner of the land. This is the opinion of the majorly of the jurists. However, according to lmam Abu Hanifa, it is the responsibility of the land lord to pay the Zakat on the product. I think that the arguments of the majority seem to be more justified as the Zakat on product is imposed based on the nature of cultivating the land and the bulk of the product, not on the size of the land. But in case the farmer fails to pay the Zakat on the product, or if he is a non Muslim then the land owner shall have to pay the Zakat (@10%, 7.5% or 5% (as the case may be) proportionately on his part, if the land is rented on percentage of crops, and if the land is rented on money, then the Zakat is payable @2.5%, upon accumulating this income along with other incomes of the Zakat payer.