Zakat is the third pillar of Islam — an obligatory right for the poor in the wealth of those who are well off. Many Muslims want to fulfill their Zakat correctly but make mistakes in calculating the nisab or in identifying which assets are subject to Zakat. This article explains the correct calculation step by step.
Zakat becomes obligatory when five conditions are met: being Muslim, being free, owning the nisab (minimum threshold), the passage of one full Hijri lunar year (hawl) on the nisab, and the wealth being of a growing (or potentially growing) nature.
Growing wealth includes: money (riyals, dollars, etc.), gold and silver, trade goods (merchandise intended for sale), livestock, and agricultural produce. Your home in which you live, your personal-use car, and household furniture are not subject to Zakat.
The nisab is the minimum amount of wealth that, once reached and held for a full lunar year, triggers the obligation of Zakat. The gold nisab is 85 grams of pure gold (24 karat). The silver nisab is 595 grams.
In modern financial dealings, the gold nisab is used as the standard: calculate the value of 85 grams of gold at current market price and apply it to all types of wealth.
Example (2026): if the price of 24-karat gold is 250 riyals per gram, the nisab = 85 × 250 = 21,250 riyals. Anyone holding more than this amount for a full lunar year owes Zakat on it.
Zakat on cash (money in the bank or on hand): add all your local and foreign cash (after converting to your local currency) plus debts owed to you that you expect to be repaid. If the total reaches the nisab and a full lunar year has passed, pay 2.5% (a quarter of a tenth). Example: someone holds 80,000 riyals for a full lunar year. Zakat = 80,000 × 2.5% = 2,000 riyals.
Zakat on gold: total all your gold (jewelry for trade or savings) and multiply by the price per gram, then pay 2.5%. Personal jewelry worn for adornment is a matter of scholarly disagreement; the more cautious position is to pay Zakat on it.
Zakat on stocks: companies are divided into pure trading companies (retail, food) where 2.5% of the market value of shares is due; and service or industrial companies (with large fixed assets) where only your share of the company's Zakat-eligible profits is calculated based on financial statements. If this detail is too complex, paying 2.5% of market value as a precaution is acceptable.
Business owners: value your inventory at market price on the date the lunar year is complete, add receivable debts owed to you, and subtract debts you owe. Pay 2.5% on the net result.
Example: a clothing merchant with 200,000 riyals of inventory, 50,000 riyals in the bank, 30,000 riyals owed by customers, and 40,000 riyals owed to suppliers. Zakat base = 200,000 + 50,000 + 30,000 − 40,000 = 240,000 riyals. Zakat = 240,000 × 2.5% = 6,000 riyals.
It is recommended to set a fixed annual "hawl date" to make calculation and compliance easier — Ramadan is recommended for its spiritual merit and multiplied reward. However, Zakat is due as soon as the lunar year is complete and does not require waiting for Ramadan.
The eight categories of Zakat recipients are specified in the Quran (Surah At-Tawbah): the poor, the needy, those who administer Zakat, those whose hearts are to be reconciled, freeing of enslaved persons, those in debt, in the way of God, and the stranded traveler. It can be given directly to recipients or through trusted charitable organizations.
A: Once received, salary becomes cash wealth. If it remains with you until the lunar year is complete along with the rest of your savings and reaches the nisab, Zakat is due on it. It is totaled at the end of the lunar year with all other wealth — each salary is not calculated separately.
A: A debt you owe is deducted from your Zakat base if you will repay it within the year. A debt owed to you by others: if you expect it to be repaid, include it in your Zakat base; if repayment is doubtful, exclude it until you actually receive it.
A: Zakat is on the pure gold value (weight × price per gram based on karat). Manufacturing costs are not subject to Zakat. For example: an 18-karat gold ring weighing 10 grams — pure gold portion = 10 × (18/24) = 7.5 grams.
A: Yes, they are treated like stocks. If the fund's reports allow you to identify Zakat-eligible assets, calculate accordingly; otherwise pay 2.5% of your market-value share as a precaution.
A: Zakat can be paid directly to eligible recipients or through accredited charitable organizations and Zakat funds. Some countries require businesses to pay trade Zakat collected by the official tax authorities.
A: Zakat may be paid in cash (the monetary equivalent of what is due) or in kind (merchandise, food, gold). Cash is generally easier and more beneficial to the recipient who can buy what they need.