Ironically, each Muslim has to pay an obligatory payment called Zakat, which equals 2.5 percent of their wealth. The concept of Zakat is a redistribution of resources and minimization of disparities. The Qur'an commands Muslims to give to the poor and needy. This charity is called Zakat and is one of the Five Pillars of Islam. Muslim governments can prosecute a person for not paying the required amount of Zakat or refusing to pay it at all. Abu Bakr, the first caliph after Muhammad, initiated jihad on those citizens who refused to pay the Zakat during the early days of his rule. The Zakat is customarily 2.5 percent (or 1/40th) of a Muslim's total savings and wealth above a minimum amount known as the nisab. The nisab varies depending upon whether your wealth is in real estate, agriculture commodities like cotton or corn, livestock like sheep, cattle, horses, gold, and silver. In the West, citizens are used to income taxes and sales taxes. The Zakat would be classified as a wealth tax.
Islam stands for social cohesion, mutual love, affection, social harmony, and brotherhood from the Muslim perspective. Therefore, it strives to rid Muslim society of those inequalities, which can cause hatred, malice, and ill-feeling among individuals. The Zakat incentivizes the rich to help the needy by promising them a reward in the hereafter. The Zakat is for mostly charitable purposes, but there can be other uses. The following eight categories of people are considered deserving of Zakat:
1. The needy (someone who is in difficulty).
2. The poor (low-income or indigent).
3. Those who are designated by the state to collect Zakat.
4. Those whose hearts are to be reconciled (new Muslims and friends of the Muslim community).
5. For the emancipation of slaves.
6. For alleviating one from the burden of debt.
7. In the cause of Allah, and
8. Wayfarers (stranded or traveling with few resources).
In the period after the 9/11 terrorist attacks, it was found that many Muslims would contribute to groups designated as terrorist organizations by the U.S. government. They were meeting their obligation to provide Zakat to those who labored "in the cause of Allah."
How much Zakat do you need to pay?
Zakat is paid on the amount of wealth that one person processes minus a minimum amount referred to as the nisab. The Prophet set the nisab equivalent to 85 grams of gold or 600 grams of silver. Most people use the value of gold to determine if their wealth exceeds the minimum amount of wealth allowed. In today's value, the amount of gold is approximately 3 U.S. ounces, valued at about $5,400, give or take. So, if your wealth approaches $100,000, then subtract the $5,400, and your obligation is 2.5 percent of the remainder. That's a quick and easy visualization of how Zakat works.
Because Muhammad lived in a rural community, he set different limits for the nisab. If your wealth is in agricultural produce, the nisab is 1439 lbs.; if you have cattle or sheep or other types of bovine (yaks, for example), the nisab is 30 animals; for camels, the nisab is 5.
For wealth measured in money, the Zakat is due at the end of the year when you exceed your nisab. It is acceptable to pay it monthly, quarterly, or even annually. There is no annual requirement on agricultural produce because, unlike money, it comes at harvest time, so it is due upon harvest. If you have a complicated balance sheet, there are numerous Zakat calculators on the internet
Muslims look upon Zakat not as a tax but as a spiritual obligation. Zakat plays a crucial role in supporting the poorest in the community by providing them with essential aid and helping them come out of a life of poverty.