Zakat Calculator: A Beginner’s Guide On How to Calculate Zakat

Zakat Calculator

Zakat is technically defined as a charitable donation made by Muslims, which can be calculated as 2.5% of their surplus wealth. In layman’s terms, Zakat is calculated as 2.5% percent of your savings and financial assets that are not spent towards your living expenses. 

Any income utilized to pay bills, house payments, or essential needs is not added to the Zakat calculator. When trying to figure out how to calculate Zakat, there are a couple of other criteria to meet – or if you meet the threshold to pay at all. 

A Guide On How to Go About The Zakat Calculator

When do I become obligated to pay Zakat?

You will have to make a Zakat payment on every Saudi or GCC state’s establishment that suffices the Kingdom’s residency requirements and conditions.  Zakat is also levied on the shares of Saudi partners in mixed companies.

What is Nisab? 

Nisab is the least or min amount of wealth that functions as a threshold to decide whether Zakat is obligatory on you. If what you own is more than Nisab, then it means you are eligible to make a Zakat payment that year. If it is less, then you don’t need to make Zakat payments

According to Islamic Law, the threshold of minimum wealth (Nisab) is decided by two set values, 3 ounces of gold or 21 ounces of silver. Wealth is no longer dealt with in gold and silver as the currency, hence, one can calculate their cash value online.

Gold

The Nisab according to the gold standard is 3 ounces of gold (87.48 grams) or its equivalent in cash. One will be able to calculate this online, by multiplying the number of grams by the current market value of gold.

Silver

The Nisab according to the silver standard is 21 ounces of silver (612.36 grams) or its equivalent in cash. One will be able to calculate this online, by multiplying the number of grams by the current market value of silver.

If you’re wondering which Nisab threshold (gold or silver) to use then, according to the Hanafi school of thought, the silver standard is predominantly used to ascertain the Nisab threshold and eligibility to make a Zakat payment. That being said, there are contemporary scholars within the Hanafi school who would prefer using the gold standard, especially in today’s age where the cost of living is far higher than it used to be and the value of silver has significantly reduced. 

The other schools of thought utilize the value of gold, but one can choose to use the silver standard if one would like to increase the amount of charity distributed.

How Do I Know If I Need to Pay Zakat?

According to online sources, the majority of scholars concur that the basic conditions for Zakat are that it is mandatory for Muslim adults, of sound mind, who owns the minimum amount of Zakatable wealth, or Nisab, for at least one lunar year.

That being said, there are some schools of thought who put forward that Zakat is also eligible upon minors who have wealth or inheritance if they meet the other conditions: Muslim, complete ownership of the wealth for one lunar year, and meet the Nisab threshold. Of course, this is not eligible for children’s allowances or Eid money, but rather applies to minors with trust funds and inheritances. 

Zakat Calculator: How to calculate Zakat?

Just like taxes, learning how to calculate Zakat is pretty straightforward in most circumstances, as the basic formula is as follows:

1. Tally or total up all your sources of income: 

Total up all the assets that you have owned for the past year. This consists of:

Cash + Gold & Silver + Debts Owed to You + Investment Property + Investment & Saving Funds + Shares & Stocks + Business Assets = Your Total Income

2. Calculate the total of your immediate needs and living expenses

This consists of:

Debts You Owe + Personal & Living Expenses + Business Expenses = Your Living Expenses

3. Calculate the total Zakatable Wealth, which is: 

Your Total Income – Your Living Expenses = Your Zakatable Wealth

4. Check if it’s above threshold for Nisab

If you decide to go with the gold or silver value for Nisab, find out the current cash value of your Nisab threshold. If your Zakatable Wealth is more than the Nisab threshold, then you can carry forward to the next step!

5. Calculate how much Zakat you have to pay by using this formula:

Your Zakatable Wealth x 2.5% = Total Zakat You Owe for the Year

If a company pays Zakat to an official charity through verified zakat accounts, will it be satisfactory and approved by GAZT?

GAZT is responsible for collecting Zakat payments from all establishments subject to Zakat Law. The GAZT is responsible for deposits of the collected Zakat in the Saudi Arabian Monetary Agency’s account allocated for the Ministry of Social Affairs.

How is the Zakat amount calculated?

The zakat payable amount is identified according to the field of Zakat Returns. Then, the establishment’s due Zakat is calculated according to its filed returns. The due amount of Zakat equals (2.5%) of the Zakat Base. Zakat Base can be described as the total sources of funding, excluding fixed assets and the like. Lastly, GAZT calculates Zakat Base by following the below formula: 

Zakat Base + total sources of funding – fixed assets and the like.   

What expenses are allowed to be deducted from the zakat base?

All ordinary and necessary expenses required for zakat, whether they were already paid or still due in order to reach the net result of the activity, can be eligible for payment as per to the following requirements:

  • It should be an actual expenditure substantiated by documents supporting it or other proofs that allow GAZT to confirm them even if it is linked to previous years.
  • It should pertain to business activity, not to personal expenses or other pursuits.
  • It should not be of capital nature. 
  • If capital expenses exist within the expenses, then the result of the business activity will be amended and the capital expenditure will be added to the fixed assets and addressed according to the regular percentages.

What are the followed procedures of paying due Zakat after the issuance of an invoice number?

All due payments can be made to the General Authority of Zakat and Tax through SADAD payment system via code no. (020). 

Is it permissible to delay the payment of due Zakat?

No, it is not okay to delay the payment of due Zakat. 

Can an establishment reduce the employee’s share in regular pension funds including pension funds, social insurance, or and saving funds?

The establishment is not allowed to deduct or reduce the employee’s share from Zakat Base, in such funds 

We hope this helps you understand the fundamentals of the Zakat Calculator. To make the calculation easier, you can find an online Zakat Calculator, where you can just plug in your numbers which can also calculate the value of your gold and silver automatically.

Similar to the conditions of taxes, everyone’s circumstances vary, so one must be careful when deciding how to calculate Zakat. This can be even more complicated if you don’t know anything about the Zakat Calculator, especially if  it’s something you’re doing for the first time. 

We hope this article has offered you the confidence and tools for how to calculate your Zakat.

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