Zakat on Gold
Zakat on Gold: Definition
Zakat on gold is mandatory similar to Zakat al-mal for all Muslims which is to be charged over the total amount of gold owned by a person if it exceeds a certain quantity. The quantity over which the zakat is applicable to be paid is known as nisab. The nisab for gold or gold jewellery is 85 grams (g) of gold . It means that if a person owns 85g of gold and has held it for more than a (lunar) year then he is obligated to pay zakat over the gold owned by him. The nisab for gold during the lifetime of Holy Prophet (PBUH) is known to be 20dinars of gold. 
Zakat on Gold: Overview
The percentage of zakat on gold is same as on all other monetary items, that is, 2.5 percent of the total worth of savings . Therefore, a person having more than 85g of gold, held for over a year has to pay 2.5 percent. It is worth mentioning here that both the traders and the individuals have to pay zakat on all of the gold if it is higher than the prescribed nisab, unlike in property where the property for residential purpose in exempt from zakat payments.
The quantity of gold is therefore always taken into consideration in existing zakat collection systems in Pakistan, Saudi Arabia, Malaysia, Indonesia and other Muslim countries. In Indonesia, the three institutions (RZI, BAZNAS and Dompet Dhuafa) dealing in Zakat calculation use gold as the parameter for Zakat. Two of these organizations (RZI and BAZNAS) deduct the debt from total debts whereas Dompet Dhuafa’s calculations include total debts. Dompet Dhuafa, however, does not take into consideration the basic need while calculating Zakat . Thus, the calculations may vary in some areas and institutions but the basic principles such as nisab and the percentage to be charged is the same in all cases.
Quran and Hadith
The importance of zakat has been stressed upon a number of times in the Quran. In Surah Al-Bayyinah: “And they were commanded not, but that they should worship Allah, and worship none but Him alone (abstaining from ascribing partners to Him), and perform Salat and give Zakat, and that is the right religion”(98:5). In the above Ayat of Holy Quran, the mentioning of zakat along with the basic and most important elements of Islam such as salat and worshipping Allah only, demonstrates the significance of zakat in the lives of Muslims. The Holy Prophet in one report said: From gold, take nothing until it reaches 20 dinars. At 20 dinars, there is a half dinar due”. (Ibn Hazm, Al-Muhalla, 6:69, Fiqh az Zakat).
Zakat on gold is therefore essential and compulsory like other monetary and financial items. Throughout history, gold has been used as the basis for zakat calculation and payment, further underlining its significance.
- Adebayo, R. Ibrahim. "Zakat and Poverty Alleviation: A Lesson for the Fiscal Policy Makers in Nigeria." Journal of Islamic Economics, Banking and Finance 7.4 (2011): 26-41.
- Hassan, Riaz. "Giving and Gaining: Philanthropy and Social Justice in Muslim Societies." Lahore Journal of Policy Studies (2007).
- Siswantoro, Dodik. "The Need of Standardization of Individual Zakat Calculation in Indonesia." Tazkia Islamic Finance and Business Review 7.1 (2012).
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