What Does Zakat Mean?
Zakat is an Islamic finance term referring to the obligation that an individual donate a certain proportion of their wealth each year to charitable causes. Zakat is mandatory for all Muslims in most countries and is considered to be a form of worship. Giving away money to the poor is said to purify yearly earnings that are over and above what is required to provide a person and their family with their essential needs.
Key Takeaways
- Zakat is a religious obligation for all Muslims who meet the necessary criteria to donate a certain portion of their wealth each year to charitable causes.
- It is said to purify yearly earnings that are over and above what is required to provide individuals and their families with their essential needs.
- Zakat is based on income and the value of possessions.
- The common minimum amount for those who qualify is 2.5% or 1/40 of a Muslim’s total savings and wealth.
- No zakat is required when someone’s personal wealth falls below the threshold during a lunar year,
How Zakat Works
There are five pillars of Islam: the declaration of faith, prayer, fasting during Ramadan, the Hajj pilgrimage, and zakat. Zakat is a compulsory procedure for Muslims who earn above a certain threshold. It should not be confused with sadaqah, the act of voluntarily giving charitable gifts out of kindness or generosity.
Religious texts offer comprehensive descriptions of the minimum amount of zakat that should be distributed to those less fortunate. It generally varies, depending on whether wealth came from farm produce, cattle, business activities, paper currency, or precious metals like gold and silver.