Zakat
Zakat is the obligatory annual alms on qualifying wealth above a minimum threshold, payable to specified categories of recipients. It is one of the pillars of Islam, and in some countries it is collected by the state.
Also called: zakah · zakaat · obligatory alms
Zakat falls due on wealth such as cash, trade goods, gold and silver, livestock and crops that exceeds a threshold (nisab) and, for most assets, has been held for a lunar year. For cash and trade goods the rate is 2.5 per cent. The Qur'an names eight categories of recipient, including the poor, the needy, those in debt and wayfarers.
In finance zakat arises in several ways. Some states collect it from companies — Saudi Arabia does so through its tax authority, and Malaysia's state religious authorities collect it from individuals and firms. Islamic banks and funds may calculate zakat per share for investors or pay it on their own behalf, and zakat bodies are an important source of funds for poverty relief and qard hasan.
In practice
Zakat is not ordinary charity and is not the same as a tax deduction. It has fixed rates, thresholds and eligible recipients, and voluntary giving above it is sadaqah.
Example
A trader holds US$40,000 in cash and stock for a full lunar year, well above the threshold. Zakat at 2.5 per cent is US$1,000, payable to eligible recipients.
Commonly confused with
| Term | How it differs |
|---|---|
| Sadaqah | Zakat is obligatory, with set rates and recipients. Sadaqah is voluntary, in any amount, to anyone in need. |
| Tzedakah | Tzedakah is the Jewish obligation of charitable giving. Both are religious duties to give; they have different rules on amounts and recipients. |
See also
- SadaqahSadaqah is voluntary charity: giving of any amount, at any time, to anyone in need, beyond the fixed obligation of zakat and without expecting repayment.
- WaqfA waqf is an Islamic endowment: an asset permanently dedicated so that its income or benefit serves a charitable, religious or public purpose, while the asset itself is preserved rather than spent.
- Qard HasanQard hasan is a benevolent, interest-free loan made to help the borrower rather than to earn a return. The principal remains repayable, but the lender seeks no benefit and is expected to be lenient if the borrower struggles.
- Income PurificationIncome purification is the process of identifying income that is not Sharia-compliant — such as interest earned incidentally or the share of a dividend from prohibited activities — and giving it away, usually to charity, instead of treating it as profit.
- TzedakahTzedakah is the Jewish obligation of charitable giving and economic support, a concept connected with justice or righteousness rather than optional generosity alone.