In Islam, zakat, or the giving of alms, is the fourth of the five pillars of Islam. Various rules attach to the practice but, in general terms, it is obligatory to give 2.5% of one's savings and business revenue and 5–10% of one's harvest to the poor. Possible recipients include the destitute, the working poor, those who are unable to pay off their own debts, stranded travelers and others who need assistance, with the general principle of zakaah always being that the rich should pay it to the poor. One of the most important principles of Islam is that all things belong to God and, therefore, wealth is held by human beings in trust.
The word Zakat means both "purification" and "growth". Our possessions are purified by setting aside a proportion for those in need. This cutting back, like the pruning of plants, balances and encourages new growth.
Zakat is the amount of money that every adult, mentally stable, free, and financially able Muslim, male or female, has to pay to support specific categories of people.
This category of people is defined in surah at-Taubah (9) verse 60: "The alms are only for the poor and the needy, and those who collect them, and those whose hearts are to be reconciled, and to free the captives and the debtors, and for the cause of Allah, and (for) the wayfarers; a duty imposed by Allah. Allah is knower, Wise." (The Holy Qur'an 9:60).
The obligatory nature of Zakat is firmly established in the Qur'an, the Sunnah (or hadith), and the consensus of the companions and the Muslim scholars. Allah states in Surah at-Taubah verses 34–35: "O ye who believe! there are indeed many among the priests and anchorites, who in Falsehood devour the substance of men and hinder (them) from the way of Allah. And there are those who bury gold and silver and spend it not in the way of Allah. announce unto them a most grievous penalty – On the Day when heat will be produced out of that (wealth) in the fire of Hell, and with it will be branded their foreheads, their flanks, and their backs, their flanks, and their backs.- "This is the (treasure) which ye buried for yourselves: taste ye, then, the (treasures) ye buried!" (The Holy Qur'an 9:34–35).
Muslims of each era have agreed upon the obligatory nature of paying Zakat for gold and silver, and from those the other kinds of currency.
Zakat is obligatory when a certain amount of money, called the nisab is reached or exceeded. Zakat is not obligatory if the amount owned is less than this nisab. The nisab (or minimum amount) of gold and golden currency is 20 mithqal, approximately 85 grams of pure gold. One mithqal is approximately 4.25 grams. The nisab of silver and silver currency is 200 dirhams, which is approximately 595 grams of pure silver. The nisab of other kinds of money and currency is to be scaled to that of gold; the nisab of money is equivalent to the price of 85 grams of 999-type (pure) gold, on the day in which Zakat is paid.
Zakat is obligatory after the money has been in the control of its owner for the span of one lunar year. Then the owner needs to pay 2.5% (or 1/40) of the money as Zakat. (A lunar year is approximately 355 days). The owner should deduct any amount of money he or she borrowed from others; then check if the rest reaches the necessary nisab, then pays Zakat for it.
If the owner had enough money to satisfy the nisab at the beginning of the year, but his wealth in any form increased, the owner needs to add the increase to the nisab amount owned at the beginning of the year, then pay Zakat, 2.5%, of the total at the end of the lunar year. There are minor differences between fiqh school on how this is to be calculated. Each Muslim calculates his or her own Zakat individually. For most purposes, this involves the payment each year of two and a half percent of one's capital.
A pious person may also give as much as he or she pleases as sadaqa, and does so preferably in secret. Although this word can be translated as 'voluntary charity' it has a wider meaning. The Prophet said 'even meeting your brother with a cheerful face is charity.'
The Prophet said: 'Charity is a necessity for every Muslim.' He was asked: 'What if a person has nothing?' The Prophet replied: 'He should work with his own hands for his benefit and then give something out of such earnings in charity.' The Companions asked: 'What if he is not able to work?' The Prophet said: 'He should help poor and needy persons.' The Companions further asked 'What if he cannot do even that?' The Prophet said 'He should urge others to do good.' The Companions said 'What if he lacks that also?' The Prophet said 'He should check himself from doing evil. That is also charity.'