ZAKAT IN ISLAM

AN OVERVIEW OF ZAKAT
SYSTEM IN MALAYSIA
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Presentation outline
Various types of zakat
Illustration to calculate zakat
Comparison between zakat and

taxation

ZAKAT

ZAKAT
ZAKAT FITRAH

ZAKAT ON WEALTH

Types of Zakat
1. Zakat fitrah (al-fitr)

a flat fee or levy imposed on each person.

due from the starting of Ramadhan and ends before
the eid fitr prayer.

2. Zakat from earnings (al-mal) a religious levy

on wealth.

Traditional types of wealth subject to zakat

Agricultural produce, reared animals, business, gold and
silver.

New types of wealth subject to zakat

Various forms of wealth based on the consensus of
Islamic scholars and jurists e.g. employment income,
professional income

Zakat Al Fitr / Zakat Fitrah

To contribute a certain amount of staple food or

pay an equivalent monetary amount in the

month of Ramadan before the Muslim festive
celebration or Eid al Fitr (Ariff, 1991).

The zakat al-fitr flat fee is one sa` a little more

than two kilograms of wheat, barley, dates, or

rice or the monetary equivalent (Al Qardawi,
1997).

Zakat Al Fitr / Zakat Fitrah / Zakat on Self

Compulsory

on every Muslim

Not

subjected to nisab or haul

The

rate between RM4 - RM5 per person

Payable

from the first day of Ramadhan until before the

Aidil Fitri prayer.

The

best is on the eve of Shawal

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ZAKAT FITRAH - Example

Can be paid in the form of staple food; rice, or in the form of money.
For example: 1430H/2009, the rates were:

2.268 kg (nisab / kadar)

RM2.84 (according to the value of fragrant rice)
RM1.93 (according to the value of Thai rice)
Zakat bagi negeri-negeri di Malaysia bagi tahun 2009 (kecuali Kelantan),

mengikut tahap kehidupan setiap negeri:

Selangor, Wilayah Persekutuan, Pahang, Perak, Kedah

dan Pulau Pinang RM7
Terengganu RM5, RM7 dan RM8
Johor RM5 dan RM7.50
Sabah RM6.60
Negeri Sembilan RM6.50
Melaka RM6.30
Sarawak dan Perlis RM6

*Kadar zakat ditentukan oleh Majlis Agama Negeri

Zakat on Wealth / Al- Mal

Income refers to earnings from salary,

dividends or other receivables income from

services or consultation.
Salary include annual, deferred (tunggakan),

allowance, commission, bonuses, consultation

fees.

ZAKAT ON WEALTH / Al- Mal

Depends on the amount of wealth that you have

and how long (haul) you had it for.

Your wealth has to reached its nisab (the

minimum amount upon which Zakat is payable)

and reached its haul (one lunar year)
Zakat al-mal or zakat from earnings is levied only

on Muslims whose wealth exceeds a threshold

called nisab (Kahf, 2005).

Zakat Rate
The minimum threshold (nisab) of zakat

on savings or investments is 85 grams

of gold / worth.
The rate of zakat is 2.5%; as for

livestock, both the minimum threshold

and the rate depend on the type and the
number of animals.

Ways to calculate zakat

Method 1

2.5 % on the total annual gross income ( if the total

income is more than the nisab rate).

Example :
The total annual gross income is RM33,800.00.
The zakat is RM33,800.00 x 2.5 % = RM845.00

Method 2

Zakat is paid after deducting all allowable basic expenses.

Method 3

Zakat is paid after deducting all the liabilities.

Calculation of zakat
1. Urfiiyah Method ( Capital Growth )

Current capital = Owners Equity + Debt

Financial Capital + Profit Fixed Asset
Other Non Current Assets.

2.Syariiyah Method ( Working capital)

Net Current Asset = Current Asset (full

ownership) Current Operating Liability only.

Types of Zakat on Wealth (AlMal)

Zakat on Business Income
Zakat on Employment Income
Zakat on Saving
Zakat on Shares
Zakat on Gold
Zakat on EPF
Zakat on Crops
Zakat on Livestock
Illustration on the calculations
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Zakat on Business Income

Growth method
Capital

+ Long Term Liabilities Fixed

assets- Investment
The results is multiply by 2.5percent
Working capital method
Current

assets current liabilities

The results multiply by 2.5 percent
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Zakat in business
Hadith from Rasulullah s.a.w as narrated by

Abu Daud:
indeed, Rasulullah s.a.w asked us to pay zakat
from the property that we prepare to sell
All kind of businesses owned by Muslims are

subject to zakat.

Conditions to fulfill to pay zakat on

business
The conditions that must be fulfilled to be

subject to zakat :

Muslim
A freedom person
The wealth must be from halal
sources

Those activities prohibited against Islam

cannot be included in zakat calculation

Continue...
Conditions to fulfill to pay zakat on business
Meet the nisab at the end of haul.

The nisab is 2.5% or equivalent to 85 grams of gold

Meet the haul.

Must be from productive property

E.g cash, shares, bond, ending inventory, fixed

assets (movable or immovable), net trade
receivable

Full ownership

Continue...
Conditions to fulfill to pay zakat on business
The business sources including donation are

subject to zakat
Exist the intention to be in business

The intention
The transaction

The business property is not withdrawn for

personal use

Basic items in a business Not subject

to zakat.
Fixed assets (bangunan, mesin, dan alat alat
lain)
Income accrued from productive fixed asset is
subject to zakat

Current assets

Based on the value of assets provided in the

Balance sheet or assessment on the inventory.
Zakat is based on the equivalent value of the
assets
Zakat is imposed on accounts receivable if it is
assured that the debtor will pay back

Zakat will only be imposed in the year when the debt is

collected

Basic items in a business (cont..)

Intangible assets

E.g. Shares, patent, goodwill, bond, certificate of

investment are considered equivalent to fixed assets
if they are not traded but held in the purpose to gain
dividend.
If the company invested in has already paid zakat,
thus the income is no longer subject to zakat

Long term liability

Long term liabillity to finance/ run the business is

subject to zakat

Capital and Shareholders fund

E.g. Paid up capital, premium accounts, accrued

profit are subject to zakat.

Types of calculating zakat on

business:
Growth Model

Owners equity + Long term liability fixed

assets intangible assets +/- adjustments

Working Capital Model

Current assets current liability +/adjustments

Adjustments to be made to the

calculation of zakat

DEDUCTION
income which are not subject to zakat such as
prohibited sources
amount are not wholly owned such as deposits
for utilities
Creditors
Sources that zakat has already been paid
Current assets must be productive, thus bad
debts, obselete stock, depreciation are
deducted

Adjustments to be made to the

calculation of zakat (cont..)
DEDUCTION
Charity fund such as tabung
education fund

khairat,

Charity fund which has the concept of rolling fund

is not subject to zakat on the principal amount
only.

Ending inventory
Those liabilities related to the business

operation e.g. trade creditors, payables.

Adjustments to be made to the

calculation of zakat (cont..)
Add to current assets

All gift, donations paid by the company

Add to current liability

Not related to business

restructuring of debt
Dividend payable
Overdraft
Financial lease

operation

e.g.

Zakat on Employment Income

Based on gross income

2.5 percent from the total net employment income

Based on net income

Deduction allowed
for personal expenses RM8000
for wife RM3000 per person
for children RM1000 per person
Gift/ allowances to parents- actual amount
KWSP -11percent per annum
Contribution to organisation that pay zakat Tabung Haji,
Takaful
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Zakat on Saving
It is calculated based on the lowest balance in the

saving accounts

In case of more than one saving account, the total

amount of the lowest balance need to be accounted

Zakat is payable only if the balance is more than

RM6200

Saving accounts in Tabung Haji is excluded

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Zakat on Saving
A) Zakat from saving deposit.
Cash deposit in bank is zakatable. The nisab for
cash money is based on the nisab for gold i.e. 20
mithqal (85 gram) or silver (595 gram).

The minimum amount payable for 1410H/2009 is

$6,200.00,
$6,200.00 upon which 2.5% of Zakat is taxable
Islamic calendar (354 Days)= 2.5%
Normal calendar (365 Days) = 2.577%
Changes according to price of 21K gold in the
market

HOW TO
CALCULATE
Date

Withdrawal

01.01.08
05.02.08

31.12.08

Balance

$15,000

$15,000

$1,000

04.04.08
15.11.08

Deposit

$14,000
$5,000

$4,000

$19,000
$13,000

$200

$13,200

Say in 2008, minimum limit = $6,200 (from 1.1.08

to 31.12.08)

Take minimum amount in account = $13,000. Why?

Hence zakat = 2.577% x $13,000 =

$335.01

Zakat on Shares
Listed companies (from Syariah Councils)

Shares owned at the end of haul period

2.5 percent on the lowest market price of the share

Shares traded during the haul period

2.5 percent on the net profit (capital gain)

Non-listed companies (from Syariah Councils)

Difficulties to determine the market value

Zakat is calculated based on the dividend received

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Zakat on Shares
The shares that invested in the
company is usually paid in cash.
Zakat rate is 2.5% for the lowest
value of shares. The shares must be
held by the shareholders for one year
and exclude any loan for purchasing
the shares (if any).

THE CALCULATIONS
Example 1: Shares owned at the end of one full year.

Zakat rate is 2.5 % on the lowest cost and the market

value.

200,000 units of shares in (Halal stocks listed in Syariah

Index) x RM 1.00 (the lowest price) = RM 200,000
The zakat is: RM 200,000 x 2.5% = RM5,000.

Example 2: Shares purchases within a year. The zakat

is calculated based on 2.5 % on the value of shares

after deducting the cost of purchasing new shares.

The value of shares the cost of purchasing new shares

RM500,000 - RM400,000 = RM100,000
The zakat is: RM100,000 x 2.5 % = RM2,500

Zakat on Gold and Silver

(Jewellery)
Zakat from gold and silver
The gold and silver are zakatable if they fulfill the nisab
rate and one year ownership (haul).

Unused gold
Satisfied haul and nisab of 85 gram
Value of gold as at 20/3/07 is RM71.34/gram
The rate is 2.5 percent
Used by the owner
Not subject to zakat

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Zakat on EPF
Non- absolute ownership method

Zakat paid when the contributor received the money upon

retirement
The rate is 2.5 percent

Absolute ownership method

Based on nisab and haul

Similar to zakat on saving
Payable every applicable year regardless the actual money not
received by contributors

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Zakat on Crops / Agriculture

Zakat on agriculture to owner the staple foods of the

particular countries which fulfill the nisab and haul.

Zakatable grains are paddy, dates, corn, wheat etc.

The nisab is 5 ausuk or equivalent to 363 gantang /1000kg

in Malaysia.

The haul is equivalent to one full year ownership. The

grains or fruits must be planted by the farmers.

The farmers need to pay the 5% zakat rate on agriculture

after grains have been harvested.

Zakat on Crops / Agriculture

Edible crops (processed rice, ripe fruits, etc)
For rice, 10 percent without irrigation (pengairan

semulajadi no cost) and 5 percent with irrigation (tiada

pengairan semulajadi with cost)
May be paid at the time of harvest if satisfy haul and nisab
The nisab is 1000kg
Other crops based on RM6200 for the nisab Business
income

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LIVESTOCKS
Zakat from livestocks
The livestocks are zakatable when the
owners have fulfilled the conditions for
nisab and haul.
Zakatable livestocks are sheeps, cows,
buffaloes and camels.
These livestocks must be healthy, not criple
and must not be used to work in the paddy
field or carry the goods.

Zakat on Livestock
Depend on the type of animal

30 cows (nisab) a calf (kadar)

40 cows - a cow
60 cows two calves
70 cows a cow and a calf
40 79 goats a goat
80 119 goats two goats

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Total Number
of Cow/
Buffalo

30 39
40 49
60 69
70 79
80 89
90 99
100 109
110 119
120 ke atas

Number of Cow/
Buffalo for zakat

1
1
2
1&1
2
3
2 &1
2
3 or 4

Sex

Male
Female
Male
Male &Female
Female
Male
Male & Female
Male
Female @
Male

Total Number
of Cow/
Buffalo

30 39
40 49
60 69
70 79
80 89
90 99
100 109
110 119
120 ke atas

Age

1 year or more*
2 years or more **
1 year or more *
1 year or more*& 2 years or more **
2 years or more**
1 year or more*
1 year or more*& 2 years or more **
1 year or more*
1 year or more*& 2 years or more **

Zakat on Livestocks
*For every 30 buffaloes, the zakat rate is I

male buffalo, aged 1 year or more.

For every 40 buffaloes, the zakat rate is 1
female buffalo, aged 2 years or more.
** If there are mixed female and male, the
owner can choose any buffalo or cow to be
paid as zakat.

EXEMPTION
Certain conditions that assets can be exempted
from zakat are:

Non productive fixed asset,

Non current asset,
Asset which are not fully owned by the owner,
Current operating liability,
Fund for charity,
Net receivables after zakat deduction, and
Any receivables from HARAM sources.

THE MEANING BEHIND ZAKAT

Affects three areas:

Morale
Economy
Social Surroundings

Protection for the Hereafter

Wealth do not belong to us
The More You Give, The More You Receive

Benefits of zakat
Zakat implies a deep humanitarian and social-political

value such as free society from class warfare, distrust

and corruption.

Zakat will balance the socio economy in the country

and encourage the rich to help the poor continuously.

Zakat is the backbone of Muslim nation's financial

system that keeps money in circulation.

Zakat also discourages hoarding and protect the

muslims from many other vices, as love of wealth is

the root of many immoral actions.

Benefits of zakat
The practice of zakat will produce more loving,

caring and helping society in the future.

Zakat payment will lead to growth and

development of all human beings and remove

the poor-due in the long term.
Zakat may also improve all human beings

faith and spiritual progress.

Dalil (Sources)Benefits of zakat

"Who is he that will lend to Allah a goodly loan,

then (Allah) will increase it manifold to his credit (in

repaying), and he will have (besides) a good reward
(i.e. paradise)."
[Surah Al Hadiid:11]
Verily (Ketahuilah), those who give Sadaqah (i.e.

Zakat and alms, etc.), men and women, and lend to

Allah a goodly loan, it shall be increased manifold
(to their credit), and theirs shall be an honourable
good reward (i.e. paradise).
[Surah Al-Hadiid :18]

Dalil (Sources)Benefits of zakat

If you lend to Allah a goodly loan (i.e.

spend in Allah's Cause) He will double

it for you, and will forgive you. And
Allah is Most Ready to appreciate and
to reward, Most Forbearing." [Surah
Ath-Thalaaq:17]

ZAKAT IN THE QURAN

30 places in the Quran stressing the importance
of Zakat: And Allah said: I am with you if you perform
Prayer and give Zakat and believe in My
Messengers: honour and assist them, and lend a
good loan to Allah, verily, I will expiate your sins
and admit you to Gardens under which rivers
flow (in Paradise). But if any of you after this,
disbelieved, he has indeed gone astray from the
Straight Path. (Al-Maidah: 12)

IN THE RED
From an Islamic perspective, being in debt is not
encouraged:
Greatest sin is to die in a state of debt & no

asset to pay it off

Conventional loans interest bearing and can

increase the burden of the person!

However, Islam encourages us to help one

another

FINANCING
hence under Islamic Banking = Financing!
Profit rate again replaces interest rate
So why is the profit rate under Islamic

financing usually higher than the interest rate

for a conventional loan?

FINANCING
Under Islamic financing, the customer is not

usually penalized for late payment

Under the Reducing Balance concept, if you

settle your loan before the maturity of the

period, you do not have to pay the profit due to
the bank for the remaining years
Financing restructure depends on the financial

capability of the client

Comparison between Zakat and

Taxation System
Items

Zakat

Tax

Objective

Purification of Wealth Law obligations

Calculation

As previously
highlighted

4a- 4f (taxation law)

Concept

Religious payment by
Muslim

Process of raising
money by government

Legislation

Al Quran/ Sunnah/
Ijtihad

Statute law
Common law
IRB / LHDN
Guidelines

Collection

Islamic council /PPZ

IRB /LHDN

Distribution

8 asnaf (penerima
zakat)

For govt. expenditure

and development.
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References
Basic readings:

http://www.muis.gov.sg/cms/uploadedFiles/Co
rporateGOV/Zakat/zakat_on_business_formul
a.pdf. Zakat calculation based on working
capital model

Further readings:
Bahari & Hamat (2004)Rethinking zakat on
employment income, unpublished paper
presented in 6th Asian Inter-University Seminar on
social development, 14th 16th May 2004.
Available on the net:
<http://www.geocities.com/idmpresources/04ASE
ANZakariaZahri.pdf>

Useful Links on Zakat calculation

http://www.zakat.com.my/
http://www.zakatpahang.com.my/
http://www.e-zakat.com.my

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THANK YOU
ANY QUESTIONS.

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