Zakat al-Mal Definition
The word zakat means “purity, development, blessings and praise” but in practice it refers to alms - money or food that is given to the poor . Zakat al-mal (or zakah al maal) can be defined as the obligation upon every Muslim man and woman having certain amount of wealth kept for a (lunar) year, to pay a certain amount to deserving people. Zakat is therefore the amount to be paid (obligation) calculated upon the savings (nisab) held for a year and to be paid to the needy people whether in monetary terms or in the form of commodities. Zakat al-mal was declared compulsory for Muslims in 622CE .
Zakat al-Mal: Overview
Zakat al-mal is applicable on all the financial belongings such as currency, gold, silver, property and vehicles too if these are either held with the intentions of trading or savings i.e. zakat is not applicable over things that are necessities of life. It can be illustrated with an example that a person does not have to pay zakat on the value of house where he/she has resided and uses for accommodation. However if a house is bought with the intentions of profits anticipating appreciations in the value of house, zakat will be applicable in such case. The primary difference between zakat and charity is that it is obligatory for Muslims to pay zakat if they have the specified level of savings, that is, "nisab" (equals to 85gms of gold 600gms of silver or equivalent currency) for a period of one year .
Zakat al-Mal in the Quran and Hadith
The system of zakat al-mal is well established in a number of Muslim countries such as Malaysia, Saudi Arabia and Pakistan. There are almost 39,000 Local Zakat Committees and around 250,000 people voluntarily working for zakat collection in Pakistan . Zakat is deducted from bank accounts of the customers annually in Pakistan unless they present the certificate for exemption. The circulation of wealth, brotherhood, discouraging begging and promoting self-respect are some of key blessings of zakat al-mal system. The order for zakat has been given on more than eighty different occasions in Holy Quran such as “My mercy encompasses all things, but I will specify it for the righteous who give Zakat” (7:156). Hazrat Abu Darda (R.A) narrates the Prophet Muhammad said: “The one who pays Zakat on his wealth, has purified his wealth”. Therefore the significant of zakat al-mal is evident from the sayings of Holy Prophet and the messages of the Holy Quran. First Caliph Hazrat Abu Bakar (R.A) also fought against the people who refused to give zakat.
Who is entitled to receive zakat proceeds?
Not everyone is entitled to receive the proceeds of zakat. The general assumption is that if a person qualifies to pay zakat, he/she is not entitled to receive it. According to the Holy Quran (9:60, 17:26), eight types of people can receive zakat money:
1. Miskin: the very poor, that is, people who do not have money for food, clothing and shelter.
2. Fuqara: those people whose wealth is below the nisab level.
3. Aamileen: the zakat collectors. That is, the officials that collect zakat can be paid from the zakat fund.
4. Muallafatul Quloob: the poor who need zakat to strengthen their hearts.
5. Ar-Riqaab: zakat funds can be used to free slaves.
6. Ibnus-Sabeel: a traveller who is stranded can benefit from zakat
7. Al Ghaarimeen: people whose debt is greater than their assets, so if the debt was paid off, their remaining wealth would be below the nisab level.
8. Fi Sabeelillah: those people that are on the path of Allah and are in need (e.g. people on Hajj or those seeking knowledge).
Zakat proceeds cannot be given to your husband/wife or your own: parents; grandparents; and children. A person's brothers or sisters are eligible to receive zakat. The Prophet said: "Giving alms (Zakat and others) to needy people is rewarded as alms only but giving them to a needy relative is rewarded both as alms and as a treatment that strengthens kinship" (Al Nasai..).
Zakat al-mal is one of the key pillars of Islam. It is the only pillar that deals with finance and plays a substantial role in balancing the uneven distribution of wealth to some extent. The system of zakat al-mal can therefore be regarded as the ideal system to regulate the distribution of wealth as the percentage of 2.5% of zakat is lower than the taxation rates of almost all the countries of the world.
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 Shirazi, N. (1996) TARGETING, COVERAGE AND CONTRIBUTION OF ZAKAT TO HOUSEHOLDS’ INCOME: THE CASE OF PAKISTAN. Journal of Ecnonmic Cooperation Among Islamic Countries. [ONLINE], Available at: http://www.sesric.org/files/article/55.pdf [Accessed: 26 Nov 2014]