TYPE OF ZAKAT

There are mainly two types of zakat in Malaysia namely zakat al-Fitr and zakat al-Mal.
Zakat Fitr is a one off payment that is made once in every Muslim Hijri calendar year at any time
between the first day of the month of Ramadhan and the first day of Syawal. All Muslims are
obliged to pay this, regardless of their age, status or wealth. Zakat Fitr is also known as Zakat on
the Person, Zakat of Ramadan or Zakat Fitr. Zakat al-Fitr was obliged in the second year of
Hijrah, the same year that fasting in Ramadan was made obligatory. Zakat al-Fitr is prescribed as
a means of purification for the person who fasts, redressing wrong deeds and undesirable words
uttered during fasting. Zakat is also a relief-aid to the needy.

General condition for zakat

1. Islam
2. Free citizen
3. Completeness of ownership
4. Reach the Nisab
5. Complete the haul
6. Intention to conduct business

Zakat Fitr is an obligation on the person and his dependants such as his wife, children who have
not reached maturity and parents. If he is unable to pay Zakat Fitr for himself and his dependants
due to certain difficulties, his dependants may pay Zakat Fitr for themselves and for him with his
permission. What is important is that Zakat Fitr payment has been made for every individual.

Zakat Fitr Vs Zakat Maal

Zakat Fitrah Zakat Maal

Aim on every person Aim on wealth

Paid within stipulated time No stipulated time

Amount is low and all Muslims are required to pay

Dependent on the amount of wealth the giver has
the same amount

8 Asnaf Categories Eligible To Receive Zakat

a) Fakir
- Those who does not have material possessions or means of livelihood. For example as
a result of a serious health condition or old age
 b) Miskin
- Those with insufficient means of livelihood to meet basic necessities
c) Amil
- Workers associated with collection and distribution of Zakat
d) Mualaf
- Those who converts to Islam
e) Gharimin
- Those who are in debt (borrowed money for basic expenditure)
f) Ibnu Sabil
- One who is stranded during a journey (journey must be beneficial and shariah
compliant)
g) Riqab
- Those who wants to improve their standard of living in terms of religion, educating
and learning about Islam
h) Fisabililah
- Money to be used in the way of Allah. As an example, money used for repair work of
mosques, for education purposes

Zakat al-Mal is an annual payment based on the amount of wealth owned by a Muslim
individual or organization which is payable after the ownership is above specified length of
period (hawl) and the wealth has reached the specified limit (nisab). This payment is obligatory
upon any Muslim individual or organization that has completed the requirement of Nisab
(minimum taxable amount) and Haul (one Muslim Hijri calendar year). The payment is 2.5% out
of the total wealth deemed for zakat. Zakat al-Mal can be subdivided into zakat on: Gold,
Business, Income, Shares, Saving and Insurance.

1. Gold and Silver

Gold and silver owners must contribute to Zakat if sufficient conditions have been met. For
silver it includes jewellery or items stored. It is calculated based on the current price of 1 gram of
silver. Stored and used gold owners must pay Zakat if sufficient conditions have been met. Gold
in the form of gold bars kept / invested in the bank and gold that is kept without the intention of
usage is obligated for Zakat when the weight of the gold has reached the haul and nisab of 86
grams. Zakat is then based on 2.5% of the total weight of gold from the gold bars / jewelry. Gold
intended for usage is only obligated for Zakat if the weight of a piece of the gold has reached the
haul and uruf  of 860 grams. Zakat is then based on 2.5% of the total weight of gold from the
piece of gold.
Example for Jewelry Not Intended for Usage  

Nisab 86 grams (does not change)

Today's Date: 1 Apr 2013
Nisab rate on 1 Apr 2013: $5,677 (market value of 86 grams of gold)
Current rate of gold: $5,677 / 86 = $66 per gram

Weight of my gold jewelry not intended for usage: 90 grams (above nisab)

Zakat on Gold (not intended for usage) 
= weight of my jewelry x current rate of gold x 2.5% 
= 90 grams x $66 per gram x 2.5% 
= $148.50  

Example for Jewelry Intended for Usage

Uruf 860 grams (does not change)

Today's Date: 1 Apr 2013
Nisab rate on 1 Apr 2013: $5,677 (market value of 86 grams of gold)
Current rate of gold: $5,677 / 86 = $66 per gram

Weight of my gold jewelry intended for usage: 950 grams (above uruf)

Zakat on Gold (intended for usage) 
= weight of my jewelry x current rate of gold x 2.5% 
= 950 grams x $66 per gram x 2.5% 
= $1,567.50

  

2. Business

Zakat of business is the obligatory zakat derived from business property whether based on
manufacturing, mining, fishery, shipping, supply, agriculture, services or otherwise for the
purpose of trading, whether in the form of a private business, an Islamic partnership or Non-
Muslim business, business all types of companies, cooperatives or stock businesses and so on.

Requirement

a) Muslim
- Only the Muslim’s share of the business is subjected to zakat
b) Compulsory for Halal assets only
- Non-Halal assets and activities are not subjected to zakat
 c) Haul (Periodic Term)
- Haul is based on asset value calculated from the initial inception or start of
business until the completion of one whole year according to Hijrah or Gregorian
d) Nisab valuation
- Calculated based on the current value of 86 gram of gold
e) Full ownership
- Assets that are fully owned physically or full management control of the assets
f) Compulsory for productive assets
- The assets must have growth potentials
g) Intention to do business
- The intention or purpose for business must be made when an asset becomes part
of the business that is conducted in order to gain profit

Computation Methods

The computation of Zakat on Business is based on the Working Capital Model that considers
current assets and deducts current liabilities and makes the necessary adjustments at year end.
The Accounting and Auditing Organisation for Islamic Finance Institutions (AAOIFI) FAS 9
sets out accounting rules related to Zakat on Business

Zakat On Business = (Current Assets – Current Liabilities +/- Adjustments) x 2.5%

x % of Muslim Ownership Share

3. Income

Income property means all types of wages, remuneration, payments or proceeds obtained
from the work or undertaking performed either on a regular basis or at all times. Allah explained
that all ‘good results’ must be zakat. Therefore, for those who make the salary as a profession,
then it is also included in the obligatory ‘result of business.’

Types of income

a) Payroll and Wages

- All income that have been earned, wages, remuneration and other income derived
by an employer from the employer, as a result of the work or employment done
for his employer, whether in service, after serving (pension) or after death.
Example, salaries, wages, bonuses, gratuities and others income.
 b) Zakat Free Property
- All income by wages, payments, remuneration, royalties, commissions and others
income in the form of independent work or professional services. Example,
professional consultancy fees such as lawyers, architects, clinic doctors or private
hospital and so on.
c) Zakat Property Al-Mustaghallat
- All income earned from the non-compulsory property of zakat but yields returns
by way of rental or sale of revenue. Example, rental of houses, buildings,
factories, premises, businesses and so on.

The basic needs that we take in determining the al-Kafayah Had is as follow:

a) Protection
b) Food and drinks
c) Clothes
d) Medicine
e) Education
f) Transportation

4. Shares

Shares are money invested in a company or business. For stock certificates in a company
listed on the stock market (Bursa Malaysia) it is easy to make cash compared to shares in
unlisted or cooperative companies. The stock owner is the owner of the company and shares the
profit or loss of a company. The performance of a business can usually be measured by dividend
distributed and also the price or value of such shares as a share in the stock market. Obligatory
Zakat Shares are as follow:

Firman Allah “O you who believe! Spend some of your good fruits and part of what we bring out
from the earth for you” – Al Baqarah 267

Rasulullah’s hadith from Samrah said : “Is the Messenger of Allah S.A.W ordered us to issue
zakat from the goods provided for the sale” – Abu Daud’s History
Requirements of Zakat Shares

a) Islam
- Compulsory to Muslim owners only
b) Perfectly owned
- Have the power to sell and benefit from stock or investment portfolio
c) Property of a party
- Shares or investments owned by mosques, surau and funds for general maslahah
and the like, non-obligatory zakat
d) Simply Nisab
- Investment portfolio Nisab is the same value as 85 grams of gold (20 mithqal).
When the value of the investment portfolio equals or exceeds the nisab then it is
obligatory to pay zakat
e) Just Haul
- The haul of stocks and other investment should be completed within one year of
the investment portfolio
f) Halal
- Shares issued for halal core business operations

The require zakat value is 2.5% of the value of the investment at the end of Haul. For
investments traded, the amount of profits performed over the year should be mixed.

Zakat Share = (value of investment at Haul end + earned profit) x 2.5%

5. Saving

Obligatory currency is subject to zakat as it can be used to co-operate with gold and
silver. Money is either paper, coins or equivalent with gold and silver as a purchasing power.
Nisab zakat of savings is based on the present value of the gold nisab of 20 mithqal (85
grams) or silver (595 grams).

Zakat Savings Account Method

a) Fixed Deposits
- When a fixed deposit is completed a year and the amount exceeds the nisab level
(the value of 85 grams of gold), then is obliged to pay zakat of 2.5% of the
amount of the deposit
 b) Ordinary Deposits
- It is calculated based on the amount of the lowest balance in the haul period for
the deposit
c) Savings In One Account
- If any such savings is payable a year and the lowest balance in the haul period
(after deducting the interest thereafter) exceeds the nisab level, then one is obliged
to issue zakat on the savings
d) Savings In Multiple Accounts
- If a person has multiple savings accounts, then the lowest balance within the haul
of each savings account must be mixed to calculate zakat even if it is possible to
calculate an account, the remaining end of the haul is not sufficient nisab

6. Insurance

Conventional insurance = zakat is 2.5% of the surrender value at the end of the year when
Haul and Nisab are reached

How to Calculate Zakat on Insurance

Step 1 = Find out the Nisab value (minimum value required for Zakat) for the period.

Step 2 = Ask for your current insurance statement from your insurance agent

Step 3 = Determine the start date of the insurance plan and the date when Nisab is reached

Step 4 = Find out the surrender value from your insurance statement when Nisab is reached

Step 5 = Your Zakat Insurance is surrender value (RM) x 2.5%