A simple guide to working out your zakat
Checklist
- identify the date you first reached nisab (your zakat start date)
- one lunar year later, total your zakatable assets (cash, gold/silver, shares as applicable, business inventory as applicable)
- subtract immediate debts that are actually due (and apply your chosen view on longer-term debts consistently)
- if you are still above nisab, pay 2.5 percent
- pay only to valid zakat categories, preferably through transparent, ring-fenced distribution
What is zakat?
Zakat is a fixed financial obligation and one of the Five Pillars of Islam. It is not the same as voluntary charity (sadaqah). Zakat has defined rules: when it becomes due, which assets are zakatable, the rate (most commonly 2.5 percent), and who is eligible to receive it. Because zakat is a right owed to Allah and a right owed to eligible recipients, the classical jurists treated it with care and consistency.
The two conditions: nisab and a lunar year
Zakat becomes obligatory when (1) your net zakatable wealth reaches the nisab, and (2) a lunar year (hawl) passes while you remain in a zakat-liable state.
What is nisab?
Nisab is the minimum level of wealth that makes zakat obligatory. If your net zakatable wealth is below nisab, zakat is not due. If it reaches nisab, your zakat “clock” starts, and zakat becomes payable once a lunar year passes while you remain in a zakat-liable state.
Nisab is not a personal judgement of being “rich” or “comfortable”. It is a fixed threshold set by the Prophet’s guidance and measured using gold or silver. In practice, you compare your net zakatable assets (cash and similar wealth) to the value of a set weight of gold or silver.
How is nisab calculated?
Nisab is calculated using either:
- the value of 87.48 grams of gold, or
- the value of 612.36 grams of silver
To calculate nisab in your local currency, you do this:
- choose whether you will use the gold nisab or the silver nisab
- find the current market price per gram for that metal in your currency
- multiply the price per gram by the nisab weight
So, for example:
Gold nisab = (price of gold per gram) x 87.48
Silver nisab = (price of silver per gram) x 612.36
Which nisab should you use: gold or silver?
Scholars and zakat bodies differ on which should be used today because gold and silver no longer hold the same relative value as they did historically.
Many scholars recommend using the silver nisab because it is lower, which means more people become zakat-eligible and more support reaches the poor. Others recommend the gold nisab if the silver nisab would obligate zakat on people who do not truly have surplus wealth in their context. Both views exist, so the important thing is to follow a consistent method you trust and apply it reliably.
A practical approach many people take is: use the silver nisab unless it would clearly cause hardship, and if it would, use the gold nisab. Either way, once you choose a method, stick with it consistently year to year unless your circumstances change significantly.
A simple way to use nisab in your zakat process
On the day you first notice your net zakatable wealth has reached nisab, record that date. That is your zakat start date. Then one lunar year later, you calculate your zakatable assets on that day and pay 2.5 percent if you are still at or above nisab.
When does your zakat year start?
Your zakat “clock” starts on the day your net zakatable wealth first reaches nisab. From that date you count one lunar year. Zakat is not inherently due in Ramadan. Many people pay in Ramadan for the virtue of the month, but the obligation is due one lunar year from when you first reached nisab. If you prefer to pay in Ramadan, you can do so by paying in advance, but you should still know your actual due date.
What to do if your balance fluctuates
If your money moves up and down during the year, you do not need to track daily balances for the approach you described. You identify the start date (the day you first reached nisab), then on the due date one lunar year later you calculate what you own that day. If your balance fluctuated but did not collapse to zero and you were not overdrawn, then on your zakat date you pay 2.5 percent on your total zakatable wealth on that day.
When the clock resets
If your wealth genuinely drops away such that you hit zero or you become overdrawn, and later you build back up until you reach nisab again, then your zakat year starts again from that later date. In practical terms, the “year” is tied to being in possession of qualifying wealth; if that qualifying wealth disappears and then returns, you begin counting anew.
Spreading zakat over the year
It is permissible to pay zakat in advance and to spread it through the year, provided that by your zakat due date you have paid what is due. This can help cash flow and allows you to respond to urgent needs. Keep a simple record so you can reconcile what you have paid against what you owe on your due date.
What counts as zakatable wealth
Cash and cash equivalents
Cash in any form is zakatable: bank accounts, cash at home, balances held in payment apps, and foreign currency. Any money you can access and own is generally part of zakatable wealth.
Gold and silver, including jewellery
Gold and silver are zakatable assets. There is a well-known difference of opinion on personal gold jewellery.
- In the Hanafi school, gold and silver jewellery is zakatable even if worn and used.
- In other schools, jewellery that is genuinely for personal use may be exempt, though details vary and some still recommend paying to be safe.
A cautious approach that many people adopt is to pay zakat on gold and silver jewellery, especially where it is significant in value, because it avoids falling into doubt and protects the rights of the poor.
How to calculate it is straightforward: estimate the current market value (or weight multiplied by current price per gram) and include it in your zakatable total, then apply 2.5 percent.
Shares, stocks, and funds
Shares are treated differently depending on your intention and what you actually own.
If you buy shares to trade (buy and sell for short-term profit), many jurists treat them like trade goods: you pay zakat on their market value at your zakat date (2.5 percent).
If you hold shares as a long-term investment, there are two common scholarly approaches. One approach is to pay zakat only on the zakatable portion of the company’s underlying assets (such as cash and inventory), and on any cash dividends you still hold. Another approach, used for simplicity by many contemporary scholars and zakat calculators, is to pay 2.5 percent on the full market value on your zakat date to avoid underpayment, especially when it is difficult for ordinary investors to determine the underlying asset breakdown. If you want maximum caution and simplicity, paying on market value is the easier method.
Index funds and ETFs generally follow the same logic as shares. If you cannot reasonably separate underlying assets, use the straightforward market value method.
Business assets
Business zakat is usually due on items held for sale and on liquid assets: cash, inventory, and receivables that are likely to be collected. It is generally not due on fixed assets used to operate the business (machinery, equipment, furniture, vehicles used for operations), unless those assets themselves are held for resale.
Pensions
Pensions are a complex modern category, and scholarly discussion often depends on whether the pension is actually accessible and owned in a way that resembles personal savings.
A practical way to understand the main views is this: if the money is locked and you cannot access it, many scholars treat it differently from cash you hold in your bank, and some advise paying zakat only when you actually take possession of it. Others recommend paying annually on the portion you effectively own, especially where you can see an account value and you have a clear beneficial ownership, even if withdrawal is restricted.
A middle, commonly used approach is:
- if you can access a portion now, include that accessible portion in your zakat calculation
- if it is entirely inaccessible until retirement, pay when it becomes accessible, or pay annually if you want to be extra cautious and you can afford it
Because pension structures differ widely by country and provider, it is wise to state in your blog that people should check their scheme type and follow a trusted scholar or reputable zakat calculator aligned to their context.
Investment property (buy-to-let, second homes, land held for profit)
Property is treated in zakat according to what it is being used for. The basic rule is that zakat is not charged on personal-use assets, but it is charged on wealth that is held for trade or generates cash that you keep.
1) Property bought to live in
If it is your main home, there is no zakat on the property itself. You do not pay zakat on the market value of your residence.
2) Property bought to rent out (income investment)
If you bought a property primarily to rent out (buy-to-let), the majority position is:
- no zakat on the market value of the property itself (because it is a fixed asset, not “stock” held for sale)
- zakat is due on the net rental income you still have in your possession on your zakat date (because once rent is received, it becomes cash)
So practically: rental income sits in your account like any other savings. If it is still there on your zakat date, it is included and zakat is paid at 2.5 percent.
You can deduct legitimate, due expenses before it becomes part of your savings (for example, outstanding repairs invoices, bills, or short-term liabilities due).
3) Property bought to sell (trading / flipping)
If you bought land or property with the intention of selling for profit (for example, flipping houses, trading plots, or holding land primarily to sell when the price rises), then it is treated like trade inventory.
That means zakat is due on:
- the market value of the property on your zakat date
- at 2.5 percent
This is a major difference: the intention at purchase matters. If it is “for sale”, it is like stock-in-trade.
4) A mixed intention (rent now, sell later)
This is common. People rent a property but also plan to sell when prices rise. Scholars generally say you look at what your primary intention is at any given time.
A practical approach is:
- if the property is genuinely held as a rental asset (not actively treated as inventory for sale), treat it as category (2)
- if you decide it is now “held for sale” (you have listed it, you are actively marketing it, or you have switched to a trading intention), treat it as category (3) from that point
5) Zakat on capital gains
Zakat is not calculated on “profit” that you have not realised. You pay zakat on the asset if it is trade inventory, or on the cash once you sell and hold the proceeds. When you sell a rental property, the sale proceeds become cash and are zakatable if you still possess them at your zakat date (or immediately if they take you above nisab and you then run a year).
In summary
- main home: no zakat on the property value
- rental investment: no zakat on property value; zakat on saved rental income
- trading/flipping: zakat on full market value each zakat date
- mixed intention: follow the primary intention; if it becomes “for sale”, treat as trade inventory
Debts, loans, mortgages, and what you can deduct
Money you owe
Scholars agree that genuine debts affect zakat, but they differ on the scope of what you may deduct. Many contemporary zakat guides allow deducting immediate liabilities that are due and payable.
A commonly applied method for laypeople is to deduct:
- short-term debts that must be paid soon (for example, upcoming bills, credit card balances due, and instalments due within the near term)
- overdue debts you must clear
Long-term debts (like the full remaining mortgage balance) are treated differently in different opinions. Many scholars do not allow deducting the entire remaining mortgage because it would effectively cancel zakat for many people for decades. A widely used practical approach is to deduct only the instalments due in the coming period (often the next 12 lunar months or the immediate due amounts), not the entire mortgage principal.
Money owed to you
If someone owes you money, it depends on how likely you are to receive it.
- If repayment is likely, many scholars include it as part of your zakatable wealth.
- If it is doubtful or disputed, some scholars advise paying zakat when you actually recover it.
This avoids punishing someone for money that exists only on paper and may never return.
Student loans (money you owe) and how they affect zakat
Student loans fall under the general fiqh discussion of debts: what you owe can reduce your zakatable total, but scholars differ on how much of a long-term debt may be deducted.
If your student loan is currently repayable and you have scheduled payments, many contemporary zakat guides allow you to deduct the amount that is actually due in the near term (often the next 12 lunar months, or the immediate instalments due), because that is the portion that is a real, present liability. This approach avoids the problem of deducting an entire large balance that may be repaid over decades, which could effectively cancel zakat for years even while a person holds significant liquid savings.
If you are not required to make repayments at present (for example, you are below the repayment threshold), then there is usually nothing immediate to deduct, because no payment is presently due. In that case, your savings remain zakatable if they meet nisab and the year completes.
Where scholars or local zakat bodies permit deducting more than the short-term portion, it is typically under strict conditions and is applied carefully so that zakat is not effectively removed from those who still have net surplus wealth. The key is consistency: follow a method you trust and apply it reliably each year.
Cryptocurrency (Bitcoin and other crypto assets)
Cryptocurrency is treated in zakat according to what it represents in your hands: either a tradable asset, or a store of value you hold. Because it can be exchanged and has a market value, many contemporary scholars treat crypto as zakatable.
The simplest and most common approach is:
- include the market value of your crypto holdings on your zakat date
- add that value to your other zakatable assets
- pay 2.5 percent on the total
If you actively trade crypto (frequent buying and selling for profit), then it is even closer to trade goods, and the market value method remains appropriate.
If your crypto is locked in staking, lending, or yield products, then you still generally include its value if you own it, along with any rewards you have received and still hold on your zakat date. If you have funds trapped on an exchange or genuinely inaccessible, scholars may treat it like doubtful receivables: you pay zakat when it becomes accessible again, or you pay annually if you want to be cautious and you believe it is recoverable.
A practical way to calculate crypto zakat is to take a snapshot on your zakat date using a reliable price source, value each coin, and add them up. Then apply 2.5 percent.
- student loans: usually deduct what is actually due soon (not necessarily the whole long-term balance), especially if repayments are currently required
- if repayments are not currently due, often there is nothing immediate to deduct
- crypto: include its market value on your zakat date, then pay 2.5 percent as part of your total zakatable wealth
What is not zakatable?
Your personal living items are not zakatable: your primary home, your car for personal use, clothes, furniture, and normal household goods. Zakat is not a tax on living; it is a duty on surplus wealth and growth assets.
Who cannot receive zakat?
Zakat is not a general charity fund. It is a restricted obligation that must reach eligible recipients in a way that fulfils the Shariah requirement of transfer and ownership. For this reason, there are clear limits on who may receive zakat and how zakat may be spent.
Zakat cannot be given to one’s direct ascendants or descendants. This includes parents, grandparents and above, and children, grandchildren and below. The reason is that supporting these relatives is already a separate duty upon a person, so zakat cannot be used to replace that obligation. Similarly, spouses cannot give zakat to one another; a husband and wife have financial duties between themselves, and zakat is not meant to circulate within that relationship.
Zakat must also be given to Muslim recipients. It cannot be given to non-Muslims, and the same ruling applies to other obligatory charities such as sadaqat al-fitr, kaffarah, ushr and nadhr. Voluntary charity (nafl sadaqah), however, may be given to non-Muslims, especially where it serves kindness, good neighbourliness, or genuine need.
Zakat is not fulfilled by buying items for an institution, such as purchasing books for a school, paying for construction, or buying land for public benefit and declaring it waqf. These may be excellent acts of charity, but they do not meet the zakat requirement of transferring ownership to an eligible recipient.
Zakat is also not used for matters where ownership cannot be established. It cannot be used for the kafan of a deceased person who has no heirs, because the deceased cannot take ownership at that point. Likewise, many scholars state that a dead person’s debt cannot be paid from zakat, because zakat is meant to be given to living eligible recipients who can receive and own it, even though paying off a living person’s debt can be valid zakat if they fall under the category of those in debt.
Finally, the giver should take reasonable steps to ensure the recipient is eligible. If you cannot tell whether someone is genuinely needy, it is better to check before giving. If zakat is given carelessly and it later becomes clear the person was wealthy and not eligible, then according to many jurists the zakat has not been fulfilled and must be paid again. This is not meant to encourage suspicion, but to protect the integrity of worship and the rights of rightful recipients.
Who can receive zakat?
Zakat must be distributed to the categories specified in the Quran (Surah al-Tawbah 9:60). In practice, most people focus on the poor, the needy, and those in serious debt. The key point is that zakat cannot simply be given to any good cause. Even noble projects do not qualify unless the spending is directed to eligible recipients within the zakat categories.
﴿إِنَّمَا الصَّدَقَاتُ لِلْفُقَرَاءِ وَالْمَسَاكِينِ وَالْعَامِلِينَ عَلَيْهَا وَالْمُؤَلَّفَةِ قُلُوبُهُمْ وَفِي الرِّقَابِ وَالْغَارِمِينَ وَفِي سَبِيلِ اللَّهِ وَابْنِ السَّبِيلِ ۖ فَرِيضَةً مِّنَ اللَّهِ ۗ وَاللَّهُ عَلِيمٌ حَكِيمٌ﴾
“Zakat expenditures are only for the poor, the needy, those employed to collect it, those whose hearts are to be reconciled, for freeing captives, for those in debt, in the cause of Allah, and for the stranded traveller — an obligation from Allah. And Allah is All-Knowing, All-Wise.” (9:60)
This verse establishes the eight categories of zakat recipients and makes clear that zakat is restricted to these groups as a divinely mandated obligation.
Can zakat institutions take ownership of zakat?
In Islamic law, zakat always remains the property of the payer until it is delivered to one of the eight eligible categories mentioned in the Qur’an (Surah al-Tawbah 9:60). An institution that collects zakat does not become the owner of that money in its own right; rather, it acts as an agent or trustee appointed to deliver it to rightful beneficiaries according to Shariah rules.
The majority of scholars hold that a zakat body cannot claim ownership of zakat funds for itself. It may collect and distribute the money, but it must either deliver it directly to the poor and needy or spend it on other entitled categories such as those employed to collect and distribute zakat or those reconciled through zakat. Reasonable compensation for qualified staff is allowed under the category “those employed to collect it”, but this does not amount to the institution owning the funds as its own wealth.
Prominent contemporary jurists, such as Dr Yusuf al-Qaradawi and others, have articulated a related position: in contexts where an institution is formally appointed or authorised by legitimate authority (such as a ruler or recognised community body), it may assume administrative responsibility and manage zakat funds for distribution. This does not change the zakat’s status as belonging to the payer until it reaches eligible recipients; rather it reflects trusted delegation and strict compliance with the eight categories of recipients.
The core principle remains: zakat must ultimately be transferred into the hands of the rightful beneficiaries, and an institution’s role is that of a facilitator, not an owner. Any retention of the funds must fall under a legitimate zakat category and must be clearly accounted for; institutions cannot retain zakat for general projects or organisational purposes outside those categories.
Can zakat be supplies, or does it have to be cash?
Zakat does not have to be paid in cash. The key Shariah requirement is not the form of the zakat, but that it reaches an eligible recipient in a way that gives them ownership. If you give a poor person supplies and they take possession of them, then zakat can be valid, because the zakat has been transferred into their ownership.
Supplies can include food parcels, clothing, blankets, medicine, or other essential items, provided the recipient is genuinely eligible for zakat and the items are given to them as their property, not merely used on their behalf. This is why simply funding services, projects, or general institutional costs is often not counted as zakat: the rightful recipient never becomes the owner.
Many scholars still advise that cash is often preferable because it gives the recipient freedom to prioritise what they need most. However, supplies may be better in situations where needs are immediate, where markets are disrupted, or where you know that certain essentials are the priority.
If you donate through an organisation, the same principle applies. It can count as zakat if the organisation is acting as your agent and the supplies are delivered into the ownership of eligible recipients. If the model is not able to guarantee eligibility and ownership, then it is safer to treat that donation as voluntary charity rather than zakat.
Can zakat be given to counter Islamophobia and redress the bias against Muslims?
There is a genuine contemporary discussion among scholars about giving zakat through organisations that engage in messaging, advocacy, or to correct the distorted narrative about Islam that is prevalent in the media. One side argues that the ummah must invest strategically in correcting prejudice and misinformation, because distorted narratives cause real harm: they shape policy, restrict religious life, and normalise suspicion of Muslims. From this perspective, supporting serious media, education, and public awareness work is not a luxury but a form of communal protection and long-term benefit. On this view, it is a valid scholarly opinion that some of a person’s overall zakat may be directed to such work under a broader understanding of “fi sabilillah”, provided it is done responsibly and with clear safeguards.
Others respond that zakat is a tightly defined obligation with clearly specified recipient categories, and that its primary purpose is to transfer wealth to those in need. They emphasise that expanding zakat into media campaigns risks turning a restricted duty into a flexible fundraising tool. On this reading, “fi sabilillah” should not be widened to cover general advocacy or communications, and such work should be funded through voluntary sadaqah, waqf, or unrestricted donations rather than zakat. They also highlight a practical concern: once zakat is mixed into broad organisational spending, transparency weakens and the right of the poor may be diluted.
A balanced way to advise lay people is to acknowledge that both positions exist among scholars, and that it is not for ordinary Muslims to accuse others of invalid worship when they are following a recognised opinion. At the same time, zakat is not a place for vague spending. Even on the opinion that permits narrative-correction work within one’s zakat, it should be targeted and disciplined. This is where the “20–80” principle helps: focus on interventions that address the highest-impact causes rather than spreading funds thinly across everything. Often, improving the most decisive “20 percent” of work can deliver “80 percent” of the benefit.
In short, it is a valid scholarly opinion that part of your zakat can be directed towards strategic work that protects the community and corrects harmful misinformation, under a wider reading of “fi sabilillah”. It is also a valid scholarly position that zakat should be restricted to direct need and that broader communal causes should be funded outside zakat. Whichever view a person follows, the guiding principles should be sincerity, compliance with scholarly guidance, and disciplined targeting towards transparent, high-impact causes.
How to calculate your zakat step by step
On your zakat due date (one lunar year after you first reached nisab), total your zakatable wealth, subtract any eligible deductions, check that you are still above nisab, then pay 2.5 percent.
A simple formula is:
Net zakatable wealth x 0.025
If you paid some zakat in advance during the year, subtract what you already paid from what you owe on the due date.