Simple

Zakat Guide
Your guide to understanding &
calculating Zakat
Simple Zakat Guide

Why you need

this guide?
Zakat can be complicated.

But it doesn't have to be. We prepared this

guide to make things easy and simple,
without omitting essential information. We
hope that after reading this guide you will be
able to:

Understand the Know who pays Calculate your own

basics of Zakat Zakat and who Zakat
receives it

This guide is updated on an annual basis. If you are

reading this on a physical copy, and would like to see
the newest version, visit zakatguide.ca to download
your very own digital copy, for free!

If we've missed anything or you simply have a question,

visit us at nzfcanada.com and send us a message!

Version 6 - Published March 2022

 Simple Zakat Guide

Table of Contents

What is Zakat? 3

The Power of Zakat 4

Who Pays Zakat 5

Who Receives 7
Zakat

How do I calculate 9
my Zakat?

Zakatable Assets 10

Deductible Expenses &

Liabilities 15

Zakat Calculation 17

Additional Notes 18
Simple Zakat Guide

What is Zakat?
Linguistically, Zakat is associated
with purification and growth.

Zakat is the third pillar of Islam. It requires

Muslims to give 2.5% of their qualifying
wealth each year to help Muslims who need
it across a range of categories. Zakat is both a
spiritual duty and a vital part of the Islamic
social welfare system.

3
 Simple Zakat Guide

The Power of Zakat

"The example of those who spend their wealth in the way of

Allah is like a seed [of grain] which grows seven spikes; in each
spike is a hundred grains. And Allah multiplies [His reward] for
whom He wills. And Allah is all-Encompassing and Knowing."
(Quran 2.267)

Zakat in the Quran & The Sunnah

The word Zakat is mentioned As the Quran makes multiple

32 times in the Quran. references to Zakat, there are
numerous 'Ahadith (prophetic
Out of the 32 instances, Zakat is narrations) that discuss Zakat.
mentioned in its technical meaning
of paying Zakat 30 times. Abdullah lbn Abbas (May Allah be
pleased with him) narrates:
Furthermore, out of these 30
mentions, Zakat has been interlinked "The Prophet SAW sent Mu'adh to
with Salah, the obligatory prayer, 28 Yemen and said, "Invite the people
times. It is on this theme that the to testify that none has the right to
great scholar Al-Hafiz al-Iraqi stated: be worshipped but Allah and I am
Allah's Messenger, and if they obey
"Whoever can perform 3 pillars you to do so, then teach them that
with diligence will be able to Allah has enjoined on them five
perform fasting and hajj easily." prayers in every day and night, and
AI-Kirmani commented that Salah if they obey you to do so, then
and Zakat have been paired teach them that Allah has made it
together multiple times due to their obligatory for them to pay the
universal nature and significance." Zakat from their property and it is
to be taken from the wealthy
Surah Al-A 'rat 7:156 among them and given to the
poor."
Sahih Al-Bukhari

4
Simple Zakat Guide

Who pays
Zakat?
Those required to pay Zakat must be:

Adult Muslim Of Sound Mind

Only those who have Those who are Those not of sound mind
reached puberty non-Muslim are not or with a debilitating
are required to pay required to pay Zakat mental illness are not
Zakat required to pay Zakat

The conditions fall under the Hanafi Madhab. According to the

Maliki, Hanbali, and Shafi'i madhabs:

The guardians of the child must take

a responsibility of paying Zakat on the wealth
owned by the child.

The one who is not of sound mind is

b responsible for Zakat. The family or
caretakers must take responsibility of paying
Zakat on his/her behalf.

5
 Simple Zakat Guide

What type of wealth is Zakat due on?

Complete Ownership Passes One Lunar Year

Only the wealth that is under the One lunar year (the hawl) passes after
ownership of the Zakat payer is attaining the Nisab amount. Note, it
Zakatable. becomes very difficult to capture the
hawl for each asset coming into your
Meets the Nisab possession over the year. And thus,
Zakat is paid by those whose net the best method is the spot method:
Zakatable assets are above the Nisab once Nisab is reached for the first
value. Nisab is calculated based on time, wait one lunar year and pay
the market value of gold or silver. your Zakat on the spot, based on your
There is a difference of opinion current financial standing. If you
among the scholars regarding which dipped below the Nisab during the
Nisab should be used. NZF year, your Zakat due date will reset,
recommends using the silver Nisab. and you must wait another lunar year
after re-attaining the Nisab.
The value of silver Nisab is 595g of
pure silver, or approximately $595 Free from Haram Income
CAD as of March 2021. Zakat is not due upon earnings that
are Haram. One should dispose of
The value of gold Nisab is 85g of pure these by giving in charity, and seek
gold, or approximately $6,650 CAD forgiveness from Allah.
as of March 2021.

To determine the live Nisab values for

gold and silver, visit:
nzfcanada.com/calculate-zakat/

"Whoever is made wealthy by Allah and does not pay

the Zakat of his wealth, then on the Day of Resurrection
his wealth will be made like a bald headed poisonous
male snake with two black spots over the eyes. The
snake will encircle his neck and bite his cheeks and say,
'l am your wealth, I am your treasure'."

Sahih Al-Bukhari
6
Simple Zakat Guide

Who receives Zakat?

The Quran (9:60) specifies eight categories of people who can receive Zakat.

The poor The Needy Those employed Those whose hearts

to administer need to be
Zakat softened toward
Islam

Those in Those in In the way The Destitute

Slavery Debt of Allah Traveller

When to pay Zakat?

One Lunar Year

15 Ramadan 15 Ramadan
2021 2022

Your Zakat year starts on the date If you cannot remember the date you
your wealth first equalled or first reached the Nisab, then the date
exceeded the Nisab. Zakat should should be estimated. If this is not
then be calculated and paid after possible, then a specific Islamic date
one lunar year passes and every year should be selected arbitrarily and
thereafter on the same date. adhered to annually. Paying Zakat in
Ramadan is not necessary, although
giving charity in Ramadan guarantees
greater rewards, insha'Allah.

7
 Simple Zakat Guide

When should Zakat be distributed?

Zakat becomes obligatory for the organization, it must be distributed

individual on the day it becomes due. within one Islamic year. It is a sin to
This is the date on the Islamic delay distribution without a valid
Calendar, 12 months after the reason.
individual first reaches the nisab.
It is permissible to pay your Zakat
Thereafter, this date becomes your ahead of time. This is often
Zakat anniversary on which Zakat encouraged especially if there is a
must be paid yearly, given that you need in society. If Zakat is pre-paid,
continue to retain the nisab. then it must still be calculated on the
due date to ensure the correct
Once due, Zakat should be paid amount was paid.
without delay. If paid to a Zakat

Where should Zakat be distributed?

It is preferred to give Zakat locally if international causes, bearing in mind

deserving recipients exist. that our collective accountability for
the poor and destitute within Canada
This is based on the instruction that is paramount and must not be
the Messenger of Allah (peace be forgotten.
upon him) gave to his companion,
Mu'adh, who was sent to spread the The number of those eligible to
message of Islam in Yemen: receive Zakat in Canada is increasing
"O Mu'adh! Inform them that Allah and such individuals have a right over
makes Zakat obligatory for them. (It Canadian Zakat payers .
is) to be taken from their rich and
given to their poor."

Bukhari

Scholars allow for the distribution of

Zakat to places where there is
significant need. As Muslims living in
Canada, it is important that we
balance our giving between local and

8
Simple Zakat Guide

How do I
calculate my
Zakat?
Our calculator below will allow you to easily
calculate your Zakat payment. You can also visit
nzfcanada.com/calculate to make your
calculation online

A Zakatable Assets

B Deductible Expenses
& Liabilities

C Zakat Calculation

Paying your Zakat is a crucial act of worship; it is the most

important obligation after the five daily prayers. Therefore,
refresh your intention that you are about to embark on an act
of worship purely for the sake of Allah.

Remind yourself that calculating and paying your Zakat is a

means of purifying yourself, your wealth, fulfilling the rights of
the poor and needy, and acquiring the blessings and mercy of
Allah. Once all of this is firmly rooted in your mind and heart,
begin!

9
 Simple Zakat Guide

Zakatable Assets
Assets you own on which Zakat is payable

1. Cash & liquid assets

Cash and other liquid assets are If interest has been earned on your
subject to Zakat liquid investments, then all of it
should be given to charity.
All cash must be included, whether in Note: This is given in charity only to
a bank account, wallet, purse, locker, absolve oneself of this haram wealth.
or safe. There is no reward to be sought in this,
nor is it itself an act of charity. Interest
income would not be part of the Zakat
calculation.

My total cash amount $

2. Gold and silver

Gold and silver, in whichever form
(jewelry, coin, ingots, etc) are subject Zakatable Portion of
to Zakat. Though the scholars differ in Gold Jewelry =
this area, it is safer to pay Zakat on all (Weight of jewelry in grams -
Weight of non-metals and stones)
gold and silver jewelry. x (Resale price of gold)

When paying Zakat on jewelry, items

that are composed of more than 50% If you measured your gold in Tolas,
gold or silver are Zakatable. convert it to grams by multiplying by
11.66.
NZF takes the opinion that Zakat
Gold and silver can be valued at its
should be paid on Gold and Silver
resale value by a jeweller or you can regardless of whether it is used or not.
multiply the number of grams (of gold There is no Zakat on metals other
or silver) you own by the current than gold and silver.
market value. There is no Zakat on gemstones and
diamonds.

The value of gold in my possesions $

The value of silver in my possesions $

10
Simple Zakat Guide

3. Debts owed to you

Zakat is payable on strong debts, i.e. This does not include outstanding
money owed to you that you are wages, dowry, inheritance or assets
confident will be returned back to held in trust.
you. This may include personal loans
to family and friends.

Total amount of money I have lent to

others that I am confident will be repaid $

4. Shares, Pensions, RRSPs, RESPs, TFSA

and other Investments
Important note: In this section, Zakat is discussed for investments that are Shariah
compliant. For Shariah non-compliant investments, Zakat is given on the face
value of the investment, and any interest gains or dividends are given away.

Short-Term Investment Stock/Share Holdings

The intention is to not hold these As a long-term shareholder in a
investments for longer than one lunar company, you are considered a part
year, or to buy and sell within one owner. As such, to determine Zakat
lunar year (i.e. day trading or swing owed on your share of the company,
trading) the Zakatable assets of the company
are considered. The key formula is:
The Zakatable amount is the face
value of the investment, regardless of
the type of fund held. Zakatable Portion of Shares =
(Zakatable Asset Ratio) X (Current
Value of Your Holdings in Dollars)
Example: Fatima has $10,000 in her
TFSA account on the day her Zakat is
due. She buys and sells various shares Where, the Zakatable Asset Ratio =
on a regular basis. Her entire $10,000 Total Current Assets /Market Cap
TFSA account is a Zakatable asset.
And where, Total Current Assets
Long-Term Investment consist of Cash + Cash Equivalent +
The intention is to hold assets for Short Term Investment +Receivables
more than one lunar year. The + Inventory+Other Current Assets.
investment could be held in any (Generally, a line item on the
number of account types (RRSP, company's balance sheet)
RESP, TFSA, etc.)
And, The Market Cap is the value of
the company, taken from the latest
financial summary of the company
(Yahoo Finance is a good resource
for most publicly traded companies)

11
 Simple Zakat Guide

Example

You are a
long-term $154B $2.0T $120
investor. You
own 10 stocks in
Company Z's Market $ Current
Total Current Cap Price Per
Company Z, Assets Stock

Total Current Assets $154 Billion

Market Cap $2.0 Trillion

= 0.077 Zakatable Asset Ratio

Current value of your

Holdings in Dollars 10 Shares $120
= $1,200

Zakatable Portion of
your Share 0.077 $1,200
= $92.40

Zakat Due On Shares 92.40 0.025

= $2.31

Note: You must repeat this step for every share you own long-term

ETF's and Mutual Funds Suquq Bonds

If the ETF/Mutual Fund is Shariah The Zakatable amount is the face
complaint and holds stocks, then the value.
Zakatable portion of the Zakat can be
calculated using a proxy. Learn more RRSP
at nzfcanada.com/calculate-zakat. RRSPs are accessible and can be
liquidated, making them Zakatable.
Note: Some ETF/Mutual Funds hold
cash. In this case, the portion of the In most cases, RRSP's are long-term
fund held in cash is 100% Zakatable. investments.
A proxy may be applied to the stock
portion. If RRSPs are invested in a mutual
fund or ETF's, then Zakat is paid on
If the fund holds cryptocurrencies, the the face value. However, depending
Zakatable amount is the face value. on the size of the fund, a withholding
tax would apply. This is deducted
If Shariah non-compliant, the from the face value.
Zakatable amount is the face value.
If RRSPs are invested in company
Bonds shares, use the Zakatable Asset Ratio
Traditional bonds which pay interest formula on page 11.
have the Zakatable portion equal to
the face value of the bonds. Due to
the nature of bonds, it is advisable
not to purchase or hold bonds as an
investment. Earned interest must also
be given away in full.

12
Simple Zakat Guide

RESP Locked-In Retirement Accounts

RESPs are for the education of one's (LIRA)
children. These funds are under the LIRA's are Zakatable, if controlled.
control of the parent(s) prior to Otherwise not Zakatable.
maturity, and are subject to Zakat.
Cryptocurrencies
If invested in mutual funds or ETF's, Cryptocurrencies, by and large, are
the Zakatable amount for RESP is the treated as fiat currency. Thus, the
total value minus early withdrawal Zakatable portion is the face value of
fees/penalties (e.g., the government- these holdings regardless of the
funded portion of the fund). intention to hold them short-term or
long-term. In rare cases where the
If the RESP's are invested in company funds are staked and not accessible
shares, use the Zakatable Asset Ratio (for more than one lunar year), no
formula that appears on page 12. Zakat is due until they become
accessible again.
Note: According to the Hanafi opinion,
RESP's are issued to children and their
wealth is not Zakatable until maturity. Notes:
• The type of account in which your
investment is held does not matter.What
Pensions matters is the intention, type of
investment, and accessibility.
Pension funds that are not accessible
and with no control over the • You may have more than one portfolio:
investment, are not Zakatable. If you one for short-term trading and another for
have control over the investment, long-term investments. Treat each
then it is Zakatable even if it is not portfolio accordingly to determine the
accessible immediately. correct Zakatable amount.

Canada Pension Plan (CPP) • Inaccessible funds such as locked-in

pension funds are exempt from Zakat
CPP is not Zakatable. until the fund becomes accessible. There
is a difference of opinion among the
Defined Benefit Plan (DBP) scholars on this matter.
DBP is not Zakatable.
• The area of Islamic finance is ever-
Defined Contribution Pension Plan changing, with frequently developing
(DCPP) scholarly positions. For the most up-to-
DCPP is Zakatable. date information, please visit us at
nzfcanada.com

The total value of the Zakatable

portion of my Investments $

13
 Simple Zakat Guide

5. Property and other fixed assets

The house in which you live is not If it is a rental property then you only
subject to Zakat. have to pay Zakat on the rental
income minus the expenses related
If a property or other fixed asset is to the rental income. If you have not
purchased with the express intent to saved the rental income earned from
resell, then the entire sale value of the the rental property, then there is no
property is subject to Zakat. Zakat on it.

If the property is marked for sale and If you have no intention with a
your Zakat becomes due but you property or fixed asset (whether to
don't have enough cashflow to pay sell, keep or rent out) then there is no
Zakat, then you may pay it once the Zakat on it until your intention
funds are available. Allah knows best. changes.

The total value of my Zakatable

property and other fixed assets $

6. Business assets
Important Note: These business assets can be included in your personal Zakatable
assets if you are self-employed and not incorporated. However, if you own (or
share) a corporation, then your business assets should not be included in your
personal Zakatable assets. Your business Zakat should be calculated separately
from your individual Zakat.

Business assets include cash, finished Zakat is due on the wholesale price
goods, work in progress, raw materials of your inventory or goods for sale.
and strong debts. This is the price placed on your entire
inventory in bulk. This amount would
be Zakatable.

The total cash amount in my business $

The total value of work in progress, $

raw materials and inventory is

Account receivables of the business $

that you are confident will be collected

Total Zakatable Assets $

14
Simple Zakat Guide

Deductible Expenses
& Liabilities
Expenses and liabilities that can be deducted from your Zakatable Assets

7. Personal Liabilities
These include outstanding or overdue Interest payments are not considered
living expenses such as rent deductible liabilities for the purpose
payments, utility bills and debts. of Zakat calculation (whether
short-term or long-term). It is
For long-term debt, such as recommended to prioritize
mortgages or student loans, only the repayment of all interest-bearing
non-interest or principal portion of debt.
the upcoming lunar year's worth of
payments can be deducted. Note: Your upcoming living expenses
not related to debt repayment are not
If payments are not being paid on the deducted as liabilities. These include
upcoming rent payments, bills, food,
long-term debt, then the debt is not fees, etc
deducted from your Zakatable assets.

My outstanding or overdue basic

living expenses that have not yet $
been paid for add up to

The upcoming year's non-interest $

portion of my long-term debt

My personal debts add up to $

Money that I owe to third parties for $

completed purchases adds up to

Outstanding dowry owed $

and intended to pay

15
 Simple Zakat Guide

8. Business liabilities
Remember to only include business liabilities if you are self-employed and not
incorporated. If you own (or share) a corporation, then do your business Zakat
calculation separately from your personal Zakat calculation.

Note: A period of twelve lunar months or less is considered short-term, while

more than twelve lunar months is considered long-term.

The total value of rent, bills and $

salaries outstanding or overdue

The total value of outstanding

short-term commercial loans $

The next year's non-interest portion $

of long-term business debt

The total value of goods $

purchased on credit

Total Liabilities $

16
Simple Zakat Guide

Zakat Calculation
My Net Zakatable Assets Are:

Net Zakatable
Zakatable
Assets - Deductibles
= Assets

$ - $ = $

So, do I have to pay Zakat ?

Remember you only pay Zakat if your Using the silver Nisab will result in
net assets are equal to or higher than more Zakat being paid, in shaa Allah.
the Nisab value. If the only asset you
possess is gold or silver, then use the Nisab is the value of 85g of gold or
respective Nisab values. 595g of silver.

If you own a mixture of assets (gold, Visit nzfcanada.com/calculate to

silver, cash etc.) then use the silver determine the live Nisab values, or
Nisab. calculate it yourself on goldprice.org

I have a mixture of assets

Today's Nisab value is
$

My net Zakatable assets are

above Nisab and 2.5% of that is $ Zakat Due

We ask you to consider donating your Zakat to those

in need here in Canada. You can do this by visiting:
www.nzfcanada.com/donate
17
 Simple Zakat Guide

Additional Notes

It is quite possible that your In addition, a Zakat calculation

wealth may fluctuate above and should still be made on the Zakat
below the level of nisab during anniversary to make sure that
the year. If this is the case, then sufficient Zakat has been paid.
Zakat is only due if wealth is in
excess of the nisab on your Zakat Missed Zakat payments for
anniversary. Zakat is always paid previous years must be paid as a
on the assets owned on the matter of urgency. A realistic
Zakatable date, not on fluctuating attempt must be made to
amounts during the year or even calculate the Zakat due for
an average amount. each of the years missed.

It is permissible to prepay Zakat Last but not least, don't forget to

for future years. However; at the intend specifically for the giving of
time of payment. the intention Zakat when you make your
must clearly be for future years. payment!

Resources

Calculator Knowledge Bank

Use our online Zakat calculator or A rich repository of Zakat FAQ’s
download an offline version. Work out where you can get answers to some
your Zakat quickly and with ease. of the most common Zakat
nzfcanada.com/calculate-zakat questions.
nzfcanada.com/zakat-faq
Zakat Q/A
1-on-1 Zakat Consultation
Have questions about Zakat? Write in
your questions and one of our Zakat Sign up for a private call with one of
experts will respond to you by email. our Zakat experts. We’ll answer your
nzfcanada.com/ask-an-expert Zakat questions and help you
calculate your Zakat, no matter how
Zakat Webinars complicated your finances are.
Free knowledge-packed live nzfcanada.com/ask-an-expert
webinars conducted by local imams
and scholars, giving you the
opportunity to learn Zakat in an
interactive setting.
nzfcanada.com/events

18
 Your Trusted Zakat Partner

Since 2013, our mission has been to make the

pillar of Zakat simple, transparent, and impactful
across Canada. We envision a Muslim community
that is dignified and unified through the
prophetic teachings of Zakat.

Education Calculation Collection Distribution

115 Matheson Blvd W, Unit 214, Mississauga, ON, L5R 3L1

1.888.693.2203 | [email protected] | nzfcanada.com

National Zakat Foundation is a registered charity.

Charity No. 839912599RR0001