What Is Nisab?
Nisab is the minimum amount the Prophet, on him be peace, set as the fixed thresholds at which a Muslim must pay Zakat on eligible kinds of wealth. Different types of assets have different thresholds. Literally, nisab means ‘origin’ because the right of the poor and Zakat-worthy in one’s wealth begins at this limit of its accumulation.
How Is Zakat Calculated on Wealth?
Zakat is paid on personal, business, livestock, and discovered wealth after one Islamic lunar year from the dates they individually reach their thresholds of nisab, or on agricultural produce at time of harvest.
The Prophet himself, on him be peace, established the nisab values for all types of Zakatable wealth. For personal, business, and discovered wealth, he set each at the equivalent of our current measure of 85 grams of pure gold (approx. 3 U.S. ounces).
Some agencies currently collecting Zakat still cite silver as the measure of nisab for personal and business wealth. Muslim scholars have long since converted the silver weights and values of the Prophet’s time and specified as nisab by him, on him be peace, into their proportional gold equivalent for the purposes of authenticating nisab calculations on Zakat. Our scholars wisely did this because gold has proved a far more stable and applicable measure of actual wealth than silver and, therefore, a crucial measure of poverty. Silver as a standard for nisab places the poor under undue duress. It forces them to pay Zakat rather than receive it. At this writing, nisab for currency based on the silver standard would be $333.2. No substantial threshold of wealth. By the meticulously verified gold standard, nisab now is actually $4,144.6, far and away a more just wealth measure.
Nisab Calculation for Personal, Business, and Treasure Trove Wealth
Here’s the nisab equation for monetary conversion:
- Gold price per gram US$ x 85 grams = Nisab (most precise)
- Gold price per troy ounce US$ x 2.73295 t oz = Nisab
Here are the nisab equations based on current price per measure (13 Mar 2020 16:59 NY Time):
- $49.19 (gold price per gram) x 85 gm = $4,181.15
- $1,529.9.19 (gold price per t oz) x 2.73295 t oz = $4,181.14
Nisab and Zakat Calculation for Personal and Business Wealth
Nisab for Zakatable wealth-kinds calculated in monetary value and paid at the .025 percent rate established by the Prophet, on him be peace, is the sum of one’s personal and business wealth
|Here’s how to calculate nisab for personal wealth (P WEALTH)||Here’s how to calculate nisab for business wealth (B WEALTH = trade goods and exploited assets)|
|Total currency (on hand and in accounts)||
Business cash (on hand and in accounts)
|Separate total weights of precious metals (gold, silver, platinum, etc.)||
Net value of inventory & trade goods
|Total value special accounts (retirement, pension, education, etc)||
Total due receivables (by zakat due date)
|Total good (likely to be paid back) loans out||
Year’s net income (from exploitable & business assets (rentals, etc.)
|Total refunds, salaries, insurance cash values, prof. payments receivable by zakat due date||
Total value real estate (for investment or sale)
|SUBTOTAL = or > nisab (current price of gold per gram x 85 gm)
SUBTOTAL x .025 = due zakat
SUBTOTAL = or > nisab (current price of gold per gram x 85 gm)
When P WEALTH and B WEALTH equal nisab thresholds separately, one pays Zakat on their sum total at .025 percent. If subtotals for P WEALTH and B WEALTH streams are less than nisab separately, but equal to or greater than the nisab threshold together, one adds them and pays Zakat on their sum total at .025 percent.
- Subtotal P WEALTH + Subtotal B WEALTH = or > nisab (current price of gold per gram x 85 gm)
If you have (1) necessary, due debt payments and/or (2) paid your Zakat in advance, deduct these from your total due Zakat and pay the balance.
- Sum (P WEALTH + B WEALTH) x .025 – (necessary due debt) – (advanced zakat payment) = due zakat
What Is Necessary Debt?
Necessary, due debt payments mean payments that must be made by or within days of the Zakat due date (zdd). According to scholars, such debts do not include the calculation of total debts owed for mortgages, student debt, vehicle and equipment payments, services, subscriptions, personal loans, etc., unless a debt’s total repayment is being demanded immediately or one plans to pay off a debt in a lump sum at or within days of the zdd. This is because Zakat is an obligatory alms on one’s eligible existing, growing, or growth-capable wealth itself, while debts are a separate matter of personal obligation (see Can Zakat Be Used to Pay Debt?).
For a comprehensive explanation of nisab, Zakat rates, their calculations, and conversions see (How is Zakat Calculated on Wealth?)
To Learn more about Zakat, see our Zakat Handbook here.