Dubai: The collection of zakat — a 2.5 per cent tax on certain kinds of wealth of Muslims — rises during Ramadan as many Muslims prefer to pay their dues during the month.
Zakat is one of the ‘five pillars’ of Islam and is usually mentioned alongside salat (prayer) in the Quran because of its significance.
In the UAE, as in many other Muslim countries, there are a wide range of establishments, both government and non-government, that voluntarily collect zakat.
Often translated loosely as the ‘alms tax’, zakat is a religious obligation on those whose wealth meets a minimum threshold, called nisaab, which must have been saved up for one Islamic year (around 355 or 356 days).
Nisaab is the equivalent of 85 grams of gold or 595 grams of silver, or its equivalent in paper currency — around Dh12,000 today.
The rate of zakat that is applied to wealth that meets (or exceeds) the nisaab is one quarter of one tenth, i.e., 2.5 per cent.
Zakat, which means both ‘purification’ and ‘increase’ in Arabic, is distributed to eight categories of people, including the person who is in dire need and the traveller who is stranded.
Guidelines
However, residents should note that giving zakat during Ramadan is only proper if one Islamic (Hijri) year or less has passed since they came into possession of the nisaab value, said Shakeeb Ahmad, Research Scholar, Juma Al Majid Centre for Culture and Heritage.
“Zakat must be paid within one Hijri year since coming into possession of the minimum threshold of nisaab. You can certainly pay it before one year – in Ramadan, if it applies in your case – but not later than that,” Ahmad said.
“Many people are keen on paying zakat during Ramadan as it is a holy month in which the spiritual rewards for good deeds are increased greatly. They want their zakat – and their wealth – to be especially blessed as a result. However, you should not purposely delay paying zakat over a Hijri year just because you want to pay it in Ramadan. That is not prescribed.”
Ahmad also clarified that there is no formal link between Ramadan and zakat. However, there is a kind of zakat – called zakat al fitr – that must be paid at the end of Ramadan, before the Eid Al Fitr festival.
“Zakat Al Fitr is different than the main zakat in so many ways. The former is a certain quantity of staple food distributed to the poor at the end of Ramadan. The latter is a certain portion of wealth distributed to the listed categories of recipients throughout the year,” Ahmad said.
Collection
The scholar added that if zakat was properly collected and disbursed, it would virtually eliminate poverty in the Muslim world.
“In the old days, the state would have a special zakat collection committee that would enforce the collect of zakat and transfer it to the national treasury. Nowadays, in the absence of such an arrangement, people can hand over their zakat to a variety of establishments that collect and disburse zakat on behalf of residents. People can also personally give their zakat directly to someone in need they know, who meets the criteria of recipients.”
Zakat “blesses” the wealth and “purifies” it from greed, Ahmad added, noting it also increases empathy with the poor. “Zakat is not just a tax, it is worship,” he said.
Abdulla Ali Bin Zayed Al Falasi, Board Member and Executive Director, Dar Al Ber Society, said Ramadan is a busy season for zakat collection.
“We have submissions ranging from of tens of thousands of dirhams to tens of millions of dirhams. Our branches, main office and bank accounts are receiving zakat submissions more in Ramadan,” Al Falasi said.
Dar Al Ber then disburses the zakat on various eligible categories before the coming of the next Ramadan. It assists people, mainly in the UAE but also elsewhere, regardless of their nationality, he added.
The circumstances of eligible recipients – who must also be legal UAE residents – are checked by a special committee and kept on file to confirm they are sanctioned to receive zakat. Cases include those struggling with rent, school fees and medical bills, Al Falasi said.
“We visit the families, see their documents, expenses, income; to determine to what extent they need help. This is an ongoing process for us for the whole year before the next Ramadan arrives.”
Al Falasi added that zakat activities are closely monitored and governed by the Islamic Affairs and Charitable Activities Department in Dubai, meaning all zakat establishments work in a nearly identical fashion. However, the total amounts collected and specific people reached will be different in each case.
What is zakat?
Zakat is a religious tax in Islam that must be paid on certain types of wealth if it meets the minimum threshold (nisaab). The tax rate is 2.5 per cent, payable on a minimum of 85 grams of gold or 595 grams of silver (or its currency equivalent).
Nowadays, zakat is payable on annual savings of at least Dh12,000, meaning a minimum payment of Dh300 a year.
Calculating zakat
Ahmad Al Haddad, Grand Mufti of Dubai, said that zakat is obligatory for money, stocks and trade activity that is more than the nisaab and has been with the person for more than one Islamic Hijri year (355 or 356 days).
“The nisaab is equal to 85 grams of pure gold, and it changes in relation to gold prices. Nowadays, the nisaab is around Dh12,000. If a Muslim has this much money, whether from his salary or other sources, and the money has not gone below that number by the end of the year, that person has to pay zakat for this money, which is 2.5 per cent of the sum. This is a quarter of a tenth of the money,” he said.
People can calculate their zakat by dividing the sum of their money by 40, which will yield the same result.
If a person has only cash assets, he or she only has to add up all the money in all their bank accounts, pockets and money box.
If the person is a business owner, then he or she has to evaluate his trade goods based on the current market value, take into consideration his liquidity and deduct any outstanding debts that he can surely pay off. Then he or she can divide the sum by 40 to find out his zakat due.
Eight categories of zakat recipients
Haddad said: “Zakat is a small percentage and it will bring about blessings both financially and spiritually and aid the needy of the eight categories that zakat can be distributed to according to the 60th verse of Surat Al Tawba of the Quran: ‘Zakah expenditures are only for the poor and for the needy and for those employed to collect [zakah] and for bringing hearts together [for Islam] and for freeing captives [or slaves] and for those in debt and for the cause of Allah and for the [stranded] traveller - an obligation [imposed] by Allah . And Allah is Knowing and Wise.’”
Taxable wealth for zakat
- Gold and silver
- Cash
- Trade goods
- Camels, cattle, sheep and goats
- Crops and fruits (such as wheat, barely, dates, and raisins)
