Examples & Case Studies
The zakatable-minimum is $2000. One possess $1000 of cash, $1500 of gold and silver, and $2500 in trade goods then one’s total zakatable assets amount to $5000 (supposing one has no money lent out, or stocks). However, one also has a debt of $500 and immediate monthly expense amounts to $500 also, which will be subtracted. Thus, the total zakatable wealth is $4000. This is above the zakatable-minimum, so the obligation to pay Zakat will commence.
If one possessed this amount on the 1st of Rabi‘ al-Awwal then this is when the Zakat year starts. If then, for example, one possesses $2500 on the 1nd of Rabi‘ al-Awwal of the next year, one will have to pay 2.5% of $2500. Thus, what is taken into consideration is the amount one possesses above the zakatable-minimum at the end of one’s Zakat year. This is the amount Zakat is due upon.
Fluctuations during the middle of the year are of no consequence, unless one’s zakatable amount reaches zero. Only the beginning and end of the year are taken into account. One therefore has to possess a zakatable-minimal both at the beginning and at the end of one’s Zakat year.
The zakatable-minimum is $2000. One’s zakatable assets amount to $3000. However, one also has $500 of immediate expenses and a debt amounting to $2000. Thus, the total zakatable wealth is $500. This does not reach the zakatable-minimum and so no Zakat is due upon one. In such a case, one’s Zakat year does not even commence because one never possessed a zakatable-minimum to begin with
The zakatable-minimum is $2000. One’s zakatable assets amount to $4000. One has immediate expenses of $500 and a debt amounting to $1000. Thus, one subtracts this, and is left with a total zakatable wealth of $2500. One possesses this amount on the 1st of Muharram. Since it is over the zakatable-minimum, the Zakat year starts on this date. On the 1st of Muharram the following year the total zakatable wealth, having decreased, amounts to $1500. Since this is not equal to or more than the zakatable-minimum no Zakat will be due.
When calculating Zakat one first takes the value of the gold one possesses. Then one adds the value of silver, and all the cash he has.
If one has shares purchased for resale, one adds their (sales) value too. If one bought them without the intention of selling them on, but to benefit from their dividends, one adds the value of the dividends at that moment.
Then one adds the value of any rent from rental properties. Then one adds the value of any money lent to other people.
If one has a pension scheme one adds the value of the pension. (This is like a saving, and technically the Zakat has to be paid when one collects the money, but to avoid confusion and complications it is advisable to pay it every year one is over the nisab).
From this total figure, one subtracts one’s upcoming month’s expenses (rent, fuel, food, etc). One also subtracts the value of any immediate debts owed to others. (This is a debt which one needs to repay pay within a year.) It is, of course, permitted (and praiseworthy) not to deduct this, as it maximizes one’s Zakat – and results in greater benefit to the poor and greater reward for the giver.
If one has a long term debt like a mortgage, one can subtract the amount of the upcoming installment – but not any interest owed.
After all this, if the figure one is left with is equal to or greater than the current market value of 87.48 grams (6.61 ounces) of gold, one then pays 2.5% as zakat.