The basic conditions for Zakat to be due
Zakat is one of the pillars of Islam, and it is due on a Muslim individual's wealth when certain basic conditions are met, the most important being:
- Reaching the Nisab: the value of 85 grams of 24-karat gold, or 595 grams of silver.
- Completion of the Hawl: that is, a full Hijri year passing on the wealth while it is at or above the Nisab.
- Full ownership: the wealth must be fully owned by you, with the freedom to dispose of it.
If the conditions are met, Zakat is 2.5% of the total zakatable wealth.
What is Zakat due on?
| Included in the calculation | Not included in the calculation |
|---|---|
| Cash in hand and in bank accounts | The home you live in |
| Gold and silver held as savings | Your personal car |
| Trade goods at their market value | Work tools and equipment in use |
| Debts owed to you by others that you expect to be repaid | Furniture and personal belongings |
| Shares bought for trading, at their market value |
As for gold jewelry intended to be worn, and shares held as a long-term investment rather than for trading, scholars have detailed views and differ on them, so refer to qualified religious authorities (fatwa).
Calculation steps
- Set a fixed Hijri date each year as the date for calculating your Zakat.
- Add up the cash in hand and in your accounts.
- Calculate the value of gold and silver held as savings: number of grams × price per gram on the calculation date.
- Value trade goods at their market selling price on the calculation date, not at their purchase price.
- Add the debts owed to you that you expect to be repaid.
- Subtract debts you owe that are currently due for payment.
- Compare the result with the Nisab; if it reaches it, pay 2.5% of it.
A complete worked example
A man owns a small perfume shop, and his annual Zakat date has arrived. Assume the price of a gram of 24-karat gold on the calculation date is 400 SAR (a hypothetical figure for illustration; use the actual price on your calculation date).
Nisab: 85 × 400 = 34,000 SAR.
| Item | Calculation | Amount (SAR) |
|---|---|---|
| Cash in accounts and in hand | 60,000 | |
| Gold held as savings (bars) | 50 grams × 400 | 20,000 |
| Trade goods (perfume inventory) | At market value | 30,000 |
| Debts owed to him by customers, expected to be repaid | 10,000 | |
| Less: debts he owes to a supplier, currently due | (15,000) | |
| Zakatable wealth | 105,000 |
Zakatable wealth (105,000) is greater than the Nisab (34,000), so Zakat is due:
105,000 × 2.5% = 2,625 SAR.
Note that the shop itself (the fit-out and shelves) and his personal car were not included in the calculation.
Important notes
- The Hawl is Hijri: so tie your Zakat date to a fixed Hijri date, such as the first of Ramadan, so you do not mix up dates.
- Wealth acquired during the year: many people pay Zakat on everything they have on their annual date for simplicity, and there are detailed juristic views on this question.
- Subtracting debts: scholars differ on how much debt may be subtracted, especially long-term installments.
- Business Zakat and personal Zakat: if your business is registered and pays its Zakat to ZATCA, consult scholars on how this overlaps with your personal Zakat so the same wealth is not counted twice.
A short example: when wealth does not reach the Nisab
An employee has 25,000 SAR in his account and 20 grams of gold held as savings, and owes a debt currently due of 3,000 SAR. With the same hypothetical gram price of 400 SAR:
- Value of gold: 20 × 400 = 8,000 SAR.
- Total: 25,000 + 8,000 − 3,000 = 30,000 SAR.
- Nisab: 34,000 SAR.
The wealth has not reached the Nisab, so no Zakat is due from him on this date. But if the gold price rises or his balance grows later and reaches the Nisab, the Hawl starts counting from the time it is reached.
The example shows why it matters to use the actual gold price on the calculation date; the Nisab is not a fixed amount in SAR, but changes as the gold price changes. So make sure you know the price per gram of 24-karat gold on your Zakat date from a reliable source, then recalculate the Nisab every year, and do not rely on last year's figure.
A practical approach is to keep a simple table that you update every year on your Zakat date, listing your account balances, grams of gold, value of goods, and debts owed to you and by you, and then calculate the Nisab and the amount due from it. This table makes it easier to compare years and reduces the chance of forgetting any item.