How Is Zakat Calculated on Wealth?

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The Overview

Zakatable wealth grows or can potentially. The Prophet, on him be peace, established the kinds of wealth one owns that are eligible for Zakat. This is Revelation. There are five general types:

  1. Personal

  2. Business

  3. Agricultural Produce

  4. Livestock

  5. Discovered or Prospected Treasures

Three types have subcategories.

  • business: trade goods, exploited assets

  • crops: irrigated, non-irrigated

  • treasures: windfalls, natural resources

Payers make two assessments on each type of their Zakatable wealth:

  • zakat limit

  • zakat rate

The test question for zakat limit: Do I have its threshold amount (nisab)?

The test question for zakat rate: What is its Zakat percentage?

The Prophet, on him be peace, set the nisab threshold for each type of wealth eligible for Zakat, and he fixed the Zakat rate for each type. This too is Revelation.

He set the nisab value for personal wealth, business wealth, and discovered wealth at the equivalent of our current measure of 85 grams of pure gold (aprox. 3 U.S. ounces).[1]

He set agricultural produce nisab at 1,439 lb. (653 kg).

He set it for ovine (sheep/goats) at 40 head.

He set it for bovine (cattle/buffalo/bison/antelope/yaks/etc.) at 30.[2]

He set if for camels at 5.

The Prophet, on him be peace, fixed the Zakat rates for personal wealth and business wealth at 2.5 percent each. One assesses trade goods one owns (wares that change hands) at their current wholesale value. One assess the value of one’s exploited business assets (assets that remain as capital (not zakatable — think rental property and machines) but generate wealth (zakatable) as net income.

He fixed the Zakat rate on irrigated crops at 5 percent upon harvest, and for non-irrigated crops at 10 percent on harvest.

He fixed the Zakat rate on all types of treasure troves at 20 percent, due on extraction.

Here’s a table of Zakatable wealth streams and their respective nisab thresholds and Zakat rates.

For livestock, he fixed the nisab thresholds and Zakat rates for each kind according to headcount.

Here’s a table that shows ovine and bovine Zakat rate schedules.[3]

What Are Zakat Rates Based On?

This is a fundamentally important question. Its answer begins with weights and measures at the time of the Prophet, on him be peace, for in the end, Zakat is all about proportions of manifest wealth. He said: “Measures are the measures of Madinah. Weights are the weights of Makkah” (Abu Dawud, Al-Nasa’i, graded authentic, sahih). A similar prophetic report says: “Our [system of] weight measures is that of the Makkans. Our volume measures are those of the Madinans” (Albani, Silsilat al-Ahadith as-Sahihah, no. 164).

The Money Basis for Zakat

The Arabs at the time of the Prophet, on him be peace, used the gold dinar and the silver dirham as money, not as minted coins, so by weight not count. In Makkah, Arabia’s trade center, the tribe of Quraysh used the silver dirham as their primary trade currency.

Here is a table of the silver dirham’s calibrated system in general use among them, based on the uqiyyah unit of weight as a standard.

money basis img 300x234

Gold, Silver, and Zakat Standards on Currency

There is unanimous agreement (ijma‘) that any Muslim who owns gold and silver must pay Zakat on “it” as currency. This means there is Zakat on all money. The Prophet, on him be peace, said: “On silver, 2.5 percent is due.”

Abu Bakr (the first Caliph after the passing of the Prophet, on him be peace) celebrated for his meticulous adherence to all that the Prophet, on him be peace, did, instructed, and approved, wrote to his Zakat collector (musaddiq) sent to Bahrain, the famed Companion Anas ibn Malik: “And on silver, for each 200 dirhams, the due is 2.5 percent. If there are only 190 [dirhams], Zakat is not due, unless the owner volunteers to pay.”

This makes five uqiyyah the standard of nisab, the minimum threshold, for Zakat on money. The Prophet, on him be peace, said: “There is no sadaqah on anything less than five uqiyyah” (Muslim, Ahmad). Again, sadaqah here means Zakat (see blogpost The Difference Between Zakat and Sadaqah).

Zakat on money includes both principal and profit from it, whether or not it brings yield or grows. Its Zakat rate is low compared to crops and agricultural produce to encourage investment and discourage hoarding, which Islam is dead against.

Regarding gold, there is virtual consensus (ijma‘) among the scholars based on a conglomerate of reports taken together and the statements and practice of the Companions that 20 gold dinars equalled the value of 200 silver dirhams and formed the minimum threshold (nisab) for Zakat on gold, paid at the Zakat rate of half a gold dinar on 20 gold dinars. Other reports establish that one gold dinar equalled the value of 10 silver dirhams at the time of the Prophet, on him be peace.

Why Is Zakat on Money Today Paid Based on Gold?

Weight determined the value of the silver dirham and gold dinar as currency in the time of the Prophet, on him be peace. So, weight remains the method of measuring our currency for Zakat payments.

The Prophet’s establishment, on him be peace, of the weights of Makkah as our standard measure for currency — based on the weights of the dirham and dinar of the Makkans, renown traders in the Indian Ocean world — and the measures of Madinah, a thriving agricultural oasis, as our volume measures for crops and produce, remains in force in perpetuity for calculating Zakat nisab thresholds and payments.

Muslims have long converted to gold as the standard weight measure for the Zakat nisab threshold on currency because its coinage has proven the most constant stable measure of wealth.

Are our measures today the same as the Prophet’s, on him be peace?

Extant samples of coinage, singularly called mithqal and the exact equivalent of the gold dinar at the time of the first generation of Muslims, made it possible to match our currency weights to the prophetic standard.

Many historians, including Ibn Khaldun in his justly celebrated Al-Muqaddimah, established that 10 silver dirhams equalled the weight of seven gold dinars, or mithqals. “It is unanimously agreed upon since the early ages of Islam, the era of the Companins and the Successors, that … the weight of a silver dirham is equal to seven-tenths the weight of a gold dinar.” The great Companion ‘Umar ibn Al-Khattab, himself, standardized the legal weight of the dirham. Later, Caliph ‘Abdul-Malik standardized all coins of the realm on that legal weight.

The standard gold dinar minted by the Caliph ‘Abdul-Malik (whom scholars, Muslims and others, early and modern, unanimously agree did not change the weights of Makkan gold coins) weighed exactly 4.25 grams. That makes the standard dirham seven-tenths of that weight, or 2.975 grams. This gold dinar weight, it turns out, is also the precise weight of the Byzantine dinar.

This puts the nisab weight of silver dirhams at 200 x 2.975 gm, or 595 grams. That means the nisab weight of gold is 20 dinars x 4.25 gm, or 85 grams. As stated, Muslims converted the standard measure for nisab on currency to gold because it is a far more stable measure than silver of actual wealth. Had silver been used as the standard for nisab, it would force the poor to pay Zakat, putting them under great financial duress. As this is written, nisab for currency based on silver prices today would be $345.1, hardly a substantial threshold of wealth. Based on its agreed upon gold standard, nisab at this writing is actually $4,242.35, a juster wealth measure.

What is the basis of Zakat’s volume measures today?

In our times, the US meausre of capacity for dry goods is based on the bushel. At the time of the Prophet, on him be peace, the volume measures of the farmers of Madinah, the Ansar, were based on a measure of capacity for dry goods called a sa‘. That is not to say, the sa‘ and the bushel are equal. This is just to establish the standard unit of dry good volume measure in Madinah at the time of the Prophet, on him be peace, so we can determine the nisab threshold of grain and foodstuffs. (The sa‘ is also used for kaffarah, or atonement, payments for broken oaths and pilgrimage mistakes.)

The Madinan sa‘ measured four double-handfuls of a typical man. The sa‘ is a measure of capacity, that is, volume, but its weight in grain or pulses (like lentils, beans, etc.) is five and one-third Madinan ratls.

A wasq is 60 sa‘s. The Prophet, on him be peace, said: “No sadaqah is obligatory on anythng less than five wasqs.” Again, ‘sadaqah’ at the time of the Prophet, on him be peace, and in the Quran’s Revelation means Zakat. So five wasqs, or 300 sa‘s, is the nisab threshold for Zakat on dry goods.

Here is a table of the volume measures in the agricultrual system in general use among the Madinans at the time of the Prophet, on him be peace, based on the sa‘ unit of measure. The last item in the table is a conversion to the Madinan weight measure, the ratl.

zakat volume measure img 300x216

What are the weight equivalents for Zakat today?

First, the sa‘ measures volume, and avearge wheat grains were used as a standard. So even if a crop yield is lighter or heavier than the typical sa‘ of wheat grain, one still pays Zakat on the volume measure, once it reaches five wasqs, or 300 sa‘s. (Exceptions are made for crops not measured by volume, like cotton, where nisab is then determined either by value analogies or grain weights to an average crop.)

But the weight of one ratl of an average wheat grain has been accurately measured at 408 grams, or 14.39 oz. So one sa‘ is 408 gm x 5.333 ratls = 2,175.86 gms, or 2.176 kg (4 lb 12.75 oz). That makes one wasq (60 sa‘s) 130.56 kg (287.8 lb). So nisab on crops and produce is 652.8 kg (1,439.17 lb).

If a liquid measure is required, then one sa‘ of water is 2.75 liters (2.9 quarts), putting nisab at 825 litres, (217.9 gallons).

Is Zakat required on all crops?

The prevalent opinion of the scholars is that Zakat is required on all crops (meaning grains, vegetables, fruits, etc.) that reaches five wasqs, based on the statement of the Prophet, on him be peace. If it is not irrigated, as our earlier table of Zakat rates showed, the Prophet, on him be peace, set that Zakat rate, saying in an authentic report: “A tenth (1/10) is oblged on that which the sky waters” (Bukhari).

If it is irrigated, than half-a-tenth (that is 1/20) is its Zakat rate, provided it reaches five wasqs. Some, including Abu Hanifa, based on this hadith of a tenth, held that Zakat is due on any quantity of agricultural yield. (If you have ten bunches of radishes, for example, one goes to Zakat.) The majority of scholars, however, hold that this hadith sets the rate of Zakat, not its nisab threshold, in relation to irrigation and non-irrigation percentages of Zakat. The five wasqs hadith directly sets the nisab threshold on agricultural produce and is therefore stronger.

There is no lunar year (hawl) requirement on agricultural produce because, unlike money or the wealth it measures, it literally comes to fruition at harvest time. So it is due upon harvest.

The Prophet’s standardization of weights and measures, on him be peace, is of incalculable benefit to us. Without it, we could not properly meet our divine Zakat obligation, an essential worship pillar of primordial religion for humanity. But also, this standardization is essential if Muslims are ever to fulfill their godly duty to conduct themselves with justice and precision in trade as the divinely appointed Community of the Midmost Way on earth. And in trade, fill the measure and weigh the balance with all justice. We do not task any soul beyond its capacity (Sưat Al-An‘am, 6:152).

[1] Precious metals, like gold and silver, are commonly measured for weight in troy ounces, named after Troyes, France. The troy ounce, like the apothecaries’ ounce, is 31.103 grams. The “regular” or common US ounce (the avoirdupois ounce) is 28.3495 grams, rounded to 28.35 grams. That makes nisab at 85 grams of gold virtually 3 U.S. ounces (technically, 85.0485 grams). Nisab in troy ounces is virtually 2.75 (technically, 2.732). The British Imperial dry pound and ounce are the same as their US equivalents until the hundredweight, 100 lb US system, but 112 pounds British Imperial (written 100 cwt, (centum weight)).

[2] There are 10 genera of bovine. Here, only some commonly used names are mentioned.

[3] For camels, it is one sheep in Zakat payment for 5 – 9 camels, adding one additional sheep in Zakat payment for every 5 camels thereafter, until 20 – 24 (4 sheep), which is the maximum allowable Zakat payment in sheep for camels. From 25 camels on, it becomes gender- and age- specific camels, specified by the Prophet, on him be peace, due in Zakat payment for each 10 camels one owns thereafter. For these rates and in-kind Zakat payment specificifications, consult the well-established special sources.

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