Islamic Finance Guide

The Complete Zakat Guide

Everything you need to know about Zakat — from what it is to which assets are zakatable.

What is Zakat?

"Take from their wealth a charity by which you purify them and cause them increase."

— Quran 9:103

Zakat is one of the Five Pillars of Islam — an obligatory annual charitable contribution equal to 2.5% of a Muslim's total zakatable wealth, paid to specific categories of beneficiaries defined in the Quran.

It serves simultaneously as a form of worship, social welfare, and wealth purification. Unlike voluntary charity (Sadaqah), Zakat is obligatory on every sane, adult Muslim whose wealth exceeds the Nisab threshold for one complete lunar year (Hawl).

The Nisab Threshold

Gold Nisab
85 grams
of 24-karat gold at current market price
Silver Nisab
595 grams
of silver at current market price

If your net zakatable wealth equals or exceeds either Nisab and has been maintained for one full lunar year (Hawl), Zakat becomes obligatory. Most contemporary scholars recommend using the silver Nisab as it is lower, making Zakat obligatory for more Muslims. However, follow your scholar's guidance.

The Hawl (Lunar Year)

Zakat is only obligatory when your wealth has remained above the Nisab for a complete Islamic lunar year (approximately 354 days). If your wealth drops below the Nisab at any point during the year, the Hawl resets.

Use our Hawl Tracker in the calculator to monitor your Zakat year and get reminded when it is due.

Which Assets are Zakatable?

ZakatableNot ZakatableConditional

Cash & Bank Savings

Zakatable
All cash savings held above the Nisab for one lunar year are fully zakatable at 2.5%. Includes savings accounts, fixed deposits, and cash at home.

Gold & Silver

Zakatable
Gold and silver jewelry and bullion are zakatable based on their current market value. Personal-use jewelry rules vary by madhab — consult your scholar.

Business Inventory

Zakatable
Goods held for sale at their current market value are zakatable. This includes retail stock, wholesale inventory, and goods in transit intended for sale.

Business Profits & Receivables

Zakatable
Net business profits and money owed to you (accounts receivable) that you reasonably expect to collect within the year are zakatable.

Cryptocurrency

Conditional
Most contemporary scholars treat crypto held as an investment (for capital appreciation) as zakatable at 2.5% of current market value. Crypto held for daily transactions may be treated differently. Consult your scholar.

Stocks & ETFs

Conditional
Shares held for capital gain are generally zakatable at current market value. For shares in a company, some scholars calculate zakat on the underlying zakatable assets. Follow your scholar's preferred method.

Rental Income & Property

Conditional
Rental income is zakatable. Property held for resale is zakatable at full market value. Property held purely for generating rental income: only the rental income portion is typically zakatable.

Retirement Accounts

Conditional
Accessible retirement funds are generally zakatable on the accessible amount. Funds locked until retirement: scholars differ. Some say pay annually; others say pay when received. Follow your scholar's guidance.

Personal Home

Not Zakatable
Your primary residence is not zakatable, regardless of its value. It is considered a necessity, not an investment or source of wealth accumulation.

Personal Vehicles

Not Zakatable
Vehicles used for personal transport are not zakatable. Only vehicles held as business inventory (car dealership) would be zakatable.

Personal Clothing & Furniture

Not Zakatable
Personal use items — clothing, household furniture, appliances, tools of your trade — are not zakatable regardless of their total value.

Fixed Business Assets

Not Zakatable
Business assets used in production (machinery, factory buildings, equipment) are generally not zakatable. Only the goods produced for sale are zakatable.

Frequently Asked Questions

Do I pay Zakat on my entire wealth or just savings?

Zakat is paid on your net zakatable wealth — all zakatable assets minus eligible debts. Your personal home, car, and personal-use items are excluded. Only assets held for investment or future sale are included.

What if my wealth fluctuates during the year?

The key is that your wealth must exceed the Nisab at both the start and end of the Hawl (lunar year). If it drops below Nisab at any point, the Hawl resets from when it rises above Nisab again.

Which Nisab should I use — gold or silver?

Both are valid. The silver Nisab is lower, meaning more Muslims will be obligated to pay. Many contemporary scholars recommend silver because it is more inclusive. Consult your local scholar or imam for guidance.

Is Zakat due on 401(k) or pension funds?

For accessible funds (like a 401k you can withdraw from), most scholars say Zakat is due annually on the accessible amount. For locked-in pensions, scholars differ — some say pay when you receive it, others say pay annually.

Do I pay Zakat on crypto I bought recently?

Yes, if your total zakatable wealth (including crypto) has been above the Nisab for a full lunar year. The crypto's value at Zakat calculation time is used for the 2.5% calculation.

Can I deduct my mortgage from my zakatable wealth?

Generally, only the mortgage installment(s) due within the current lunar year can be deducted — not the entire outstanding mortgage balance. Scholars differ, so follow your school of thought.

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