Ramadan also known as Ramzan, is the holiest season in the Islamic Calendar. This is the time Muslims across the world, focus only on Praying, Fasting, Charity and Religious Devotion. Ramadan is a holy period where the first verses of the Quran were revealed to the Prophet Mohammad.
In this holy season, Muslims across the world fast during the daylight hours. Muslims do not even eat or drink during the fast. They only focus on reading the Quran, giving in charity called Zakat and refraining from gossip.
What is Zakat? Zakat is giving of alms (money in charity) to the poor and the needy. Zakat is one of the five pillars of Islam. The other pillars of Islam are Faith, Prayer, Fasting during Ramadan and the Hajj.
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Zakat is giving of alms to the poor. It is compulsorily for all financially stable Muslims to pay Zakat to the poor and the needy. A Muslim who owns a specific amount of wealth or savings, after accounting for living expenses, must compulsorily give Zakat. This specific amount of wealth is called Nisaab. Nisaab is the threshold at which Zakat must be paid. The amount of Zakat a Muslim pays is 2.5% of Nisaab.
Zakat is an obligation. When giving Zakat, a Muslim acknowledges that all he owns belongs to Allah and he doesn’t really own anything. He remembers Allah and helps those in need. Zakat frees him from excessive desire and greed and teaches self-discipline and honesty.
Most Muslims give Zakat during the month of Ramadan, as the rewards for good deeds performed in the month of Ramadan, are greater than in any other month.
A Muslim must include assets like cash in hand, money in bank accounts, money lent to someone, shares, pension, gold and silver, tradable assets owned by his business, crops and herded animals. Do remember that personal items like your home, furniture, cars, food and clothes are not included in Nisaab.
There are two measures to determine Nisaab.
If your personal wealth or what you own is more than the Nisaab, you owe Zakat. If your personal wealth is below the Nisaab, you don’t owe Zakat.
The Nisaab is the cash equivalents of 21 ounces of silver/612.36 grams of silver. Let’s say one ounce of silver is $16. The Nisaab using the silver calculation is $336 ($16*21). If your personal wealth is above $336, you owe Zakat.
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a. Identify Zakat-eligible assets:
b. Identify Zakat-liabilities:
Let’s understand how to determine Zakat Net Worth with an example. Let’s say your Zakat-assets (1 year total) = Rs 2 Lakhs. The Zakat liabilities are Rs 50,000.
Then Zakat Net Worth is Rs 2 Lakhs – Rs 50,000 = Rs 1.5 Lakhs.
If Zakat Net Worth < Nisaab; you don’t have to give Zakat for this year.
If Zakat Net Worth > Nisaab; you have to give Zakat for this year.
If you are over the Nisaab threshold, you have to give a minimum of 2.5% of Zakat Net Worth. You can give more than 2.5% if you are financially able to do so.
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