FAR658 Notes | Nursyazwani Izaty, 2024

CHAPTER 1: INTRODUCTION TO ZAKAT

DEFINITION OF ZAKAT
• Defined as: Growth, Increase & Purification, Blessings
• MASB Tri-1: zakat is an obligatory contribution assessed based on certain assets
owned by a Muslim that satisfy certain conditions and distributed to specified
categories of beneficiaries.
CONCEPT OF ZAKAT SPIRITUALLY
1. Increase or growth
- Will not lead to become poorer, but enhance prosperity in the world and achieve
success in hereafter
2. Purify
- Paying zakat will purify the soul and wealth of Muslims, from feelings of jealousy,
greed and materialism of the rich
ROLE OF ISLAMIC STATE AND THE ZAKAT INSTITUTION
• Primary role: to administer both zakat collection and distribution
• Other roles of the Islamic State and Institution of Zakat
- Ensuring payment of zakat fulfilled the conditions of zakat & conduct enforcement
- Identify asnaf that eligible to receive zakat
- Implement proper accounting and auditing that could help managing zakat efficiently
- Conduct activities to create awareness of zakat accountability
- Develop programme to help asnaf (business class)
• 4 different forms of zakat corporations
- Corporation under zakat enactment : Lembaga Zakat Negeri Kedah
- Corporation under State of Administration of Islamic Law Enactment :
PPZMAIWP
- Corporation under State of Adnimistration of other Law Enactment : Lembaga
Zakat Selangor
- State Islamic Religious Council: collection and distribution of zakat through its
unit or baitulmal or zakat centres

PURPOSES AND SIGNIFICANCE OF ZAKAT

1. Economic perspectives (Transfer of wealth from rich to the poor)
- Abolish poverty in society
- Increase the purchasing power of poor people and increase the demands of good,
boost country’s economy
- Prevent concentration or monopoly of wealth in hands of few and stabilize economy

2. Social perspectives
- Creates brotherhood between rich and poor people
- Unites the society based on true believers
 FAR658 Notes | Nursyazwani Izaty, 2024

- Eliminates the common disease of society which ranks the social classes based on
wealth

CONCEPTUAL DIFFERENCES BETWEEN ZAKAT AND TAXATION

ZAKAT DIFFERENCES TAXATION
Religious Duty to National
Muslim Imposition Muslim and Non-Muslim
Fixed by the holy Quran Rates Can be changed by the Gov
Individually Collection Collected by Gov
For 8 beneficiaries (asnaf) Utilisation Not on specific beneficiaries
Fixed by the holy Quran Nisab Varies from time to time
Imposed on all types of Sources Imposed on earned income
goods held by an individual by various sources
The pleasure of Almighty Objectives To meet the development
Allah and non-development
expenditure
Do not expect to get any Return Expect to get returns such as
return gov facilities
Limited Regional Limits Unlimited
Meet the requirement Obligation to pay Indirect taxes can be
imposed on those who
cannot pay
INNER DIMENSIONS OF ZAKAT
1. Knowing Zakat’s purpose and significance
i) To test the degree of love for Allah
ii) To eliminate miserliness / selfishness
iii) As an expression of gratitude

2. Alert with proper time of zakat payment – favourable times Muharram, Ramadan
3. Do good deeds in secret – remove hypocritical displays and reputation-seeking and
preserves dignity of zakat recipients
4. Give openly – to serve reminder for others to give zakat
5. Avoid taunting and hurting – show humbleness and not pride
6. Adopt humility – think little of their donation
LEGAL MAXIMS OF ZAKAT
1. No duplication in zakat collection – should be paid only once for specific wealth
2. Should not burden the payer and should not deprive the rights of the poor
3. Zakat is paid where the wealth is generated or located – geographical area of
the collection
4. Zakat does not purify unlawful income – wealth earned by non-permissible
income cannot be cleansed through zakat payment
5. Prepayment of zakat is allowable – esp for zakatable assets that require one year
(trade inventory, money and livestock)
6. Only the net asset or income is subjected to zakat – debts and amount required
for min standard of living are deductible because among the essential needs
 FAR658 Notes | Nursyazwani Izaty, 2024

CHAPTER 2: ZAKAT SYSTEM

CONDITIONS OF ZAKAT OBLIGATIONS

1. Islam – non muslims not obligated to pay
2. Free – Zakat payer must be a free person and not entitled to slavery
3. Complete Ownership /Milk Al Tam – owner owns the wealth by title and benefits
without any restriction of other parties
4. Haul / Completion of One Year Duration – the owner must own the wealth for 1 year
duration, paid yearly as long as the balance reaches nisab
5. Nisab – minimum of wealth that is subjected to zakat , where the wealth equals or
exceeds the nisab , deemed to pay zakat
6. Growth wealth – has growth potential , increase from time-to-time
PRINCIPLES OF ZAKAT ACCOUNTING
1. Determining zakat base (must fulfill these conditions)
- Growth or have potential for growth
- Freedom from debt
- Excess the nisab
- Complete one year haul

2. Calculating the due amount of zakat

- Zakat rate is 2.5%, Zakat rate for agriculture between 5% to 10% depending on the
effort spent on the farm

3. Preparing zakat statements and reports

- Due for the current period shall be presented on the face of income statement as
deducted expenses

4. Distributing zakat among beneficiaries

1) Poor (fuaqara’) – a person with no income source
2) Needy (masakin) – person who sources of income is insufficient to support daily
life
3) ‘Amil – an appointed person by Islamic authority to collect and manage the
zakat
4) Muallaf – people who have embraced Islam and required necessities
5) Slaves (Ar Riqab) – those who have limited freedom due to contract with their
master
6) Debtors (Al Gharimin) – people who are in debt and are unable to repay the
debt
7) Fisabilillah – those who fight against non-muslims for injustice
8) Travelers (Ibnus Sabil) – travelers stranded for lawful purposes of Islam
 FAR658 Notes | Nursyazwani Izaty, 2024

CHAPTER 3: ZAKAT ACCOUNTING FOR TRADITIONAL WEALTH

ZAKAT ON LIVESTOCK
• When the owners have met the requirements for nisab and haul, the livestock is
zakatable
• Example: sheep, cows, buffaloes, goats, camels
• Livestock must be in good health, not crippled, not used in working in paddy fields or
transporting goods
• Animal used for personal use exempted from zakat (eating, riding, transport)
CONDITIONS OF LIVESTOCK GIVEN AS ZAKAT
1. Free from defects and damages
- The animal must not be ill, defective or old because it does not benefit the poor,
pregnant or looking after its calf is prohibited

2. Specification of the animal (male/female)

- Zakat must be paid for a particular sex depending on the number in the herd

3. Age requirement
- Specific ages for zakat must be complied with for the benefit of zakat recipient
 FAR658 Notes | Nursyazwani Izaty, 2024

CONDITIONS FOR ZAKAT ON LIVESTOCK

1. The livestock must attain the nisab condition
2. Lapse of full Hijrah year while animals with the owner
3. It must be a grazed livestock – eating from plants and permissible grass, if feeds on
cultivated crops , not zakatable
4. Not zakatable on working livestock -basic needs of a man
ZAKAT FOR AGRICULTURAL PRODUCE
• Zakatable but not require the passage of a year
• Due at the time of harvesting or collection
• Zakat rates varies based on the irrigation method : 10% if watered naturally, 5% if
watered with machine or purchased water
• Cocktail method (both): 7.5%
ZAKAT ON MINERAL AND MARINE WEALTH
• All minerals originating from the earth are zakatble, solid or liquid
• Not paid on annual basis
• Due after completion of production sorting, purification, or cleaning and preparation for
sale when nisab is reached
• Equivalent of 85 grams of gold
• If the work ceases due to emergency (repair equipment): extracted minerals are to
be added together to complete minimum amount for zakat
• If the work ceases due to transfer of activity and resumed again: this interruption
is to be considered in calculating the minimum amount, so that the newly extracted will
not be added with the amount before halt
ZAKAT ON GOLD, SILVER AND JEWELLERY
1. Gold and jewellery
- Zakatable when the nisab and haul are fulfilled
- Gold nisab – 20 dinars / 85 grams

i) Gold is not intended for usage

- Gold bars or jewelries kept without intention to use is ZAKATABLE
- Nisab 85 grams, haul 1 year
- 2.5%

ii) Gold is intended for use

- Only required for zakat is weight of a piece of gold jewelry has EXCEEDED the Urf,
then calculated based on 2.5% of the value of exceeded amount
 FAR658 Notes | Nursyazwani Izaty, 2024

2. Silver
- Zakatable when own the value of 200 dirhams or 595 grams
- When the ownership fulfill haul conditions must pay 5 dirhams for every 200 dirhams
or 2.5% of zakat
ZAKAT ON MONEY (SAVINGS)
• Savings include:
- Cash in hand
- Cash in bank
- Money invests for investment
- Long term deposit in bank
• Zakatable when reached nisab ( 1 year)
• Nisab for cash is based on zakat for gold (85 grams)
• Money is calculated on the lowest balance in the savings account, if have more than
one savings account the total amount of lowest balance must be considered
• Money zakatable criteria – nisab (2.5%), passage of a year, money should be free from
debt, excess above basic needs
ZAKAT ON TRADING STOCK
• Referred as Urud al Tijarah – commodity obtained for resale or profit
• Eg: Goods/inventory for sale, money in hand or bank, debts & loans have been
extended to agents
• Zakat obligatory on the current market value
• Fixed assets are not subjected to zakat
ZAKAT FITRAH / AL FITR
• Given to poor people during Ramadan
• Contribution of a specific amount of staple food for equivalent amount paid
• Imposed on a flat amount on each person
• Not subjected to nisab and haul
• Aim is to purify Muslims from all minor mistakes they have committed