Zakat is one of the five pillars of Islam and an obligatory duty for those who meet the specific zakat criteria. Giving has been a way to help those less fortunate for centuries, lifting communities and promoting solidarity. Many types of wealth are liable for zakat, but cash is one of the most important ones. But many wonder how one would figure out or calculate zakat in cash.
Let’s discuss the process step by step to ensure you fulfill this holy obligation.
Zakat is an annual contribution that purifies earnings and belongings. It serves to ease the burden of the less fortunate and ultimately provides them with essential needs such as food, water, healthcare, and shelter.
The Prophet Muhammad (PBUH) said:
“Wealth is not decreased by Giving Charity”
(Muslim, Hadith: 558)
Giving Zakat not only helps the receivers but also enriches the soul of the giver.
How to Calculate Zakat on Cash
All cash and liquid assets that exceed the Nisab level are liable for Zakat; these include money saved in personal and business accounts, cash from foreign exchange, investments or even emergency funds. In short, all forms of wealth that can easily be turned into cash are included in the Zakat calculation. If the total wealth is more than the Nisab for a lunar year, then a Muslim must pay Zakat for that amount.
Not every Muslim need to pay Zakat. A minimum amount of wealth, called Nisab, determines whether or not one is eligible. The Nisab is based on the value of gold or silver. If the value of assets is more than 85 grams of gold and 595 grams of silver, then Zakat is applicable. This ensures that only those with more than their needs are required to give Zakat.
Example of Zakat Calculation on Cash
Add all your cash assets, such as savings, investments, foreign currency, etc. Then, subtract any outstanding debts or liabilities and calculate 2.5% of the remaining balance. That is the amount of Zakat you need to give. Let’s say you have $10,000 in cash, savings, and $1,000 in liabilities. Now, subtract the liabilities from the assets; the current value is $9,000. Take 2.5% of this amount, and you get $225. That is Zakat.
Important Considerations When Calculating Zakat on Cash
Paying Zakat Annually: Zakat is due after a full lunar year. Ensure that you pay at the right time.
New Income During the Year: If you receive new income, it is added to your wealth for Zakat calculation.
The Prophet (PBUH) said:
"The best charity is that which is given when one is in need.” (Narrated by At-Tabarani in Al-Kabir, 13646)
This shows how important Zakat is. It is a lifeline for those who are suffering, like those in Gaza, Palestine, and Lebanon, where people are struggling to meet their basic needs. So, make a Zakat donation with us because your Zakat will provide essential resources like food, shelter, and medical care to those in dire situations.
It is not just an act of giving; it is a way to ensure that our brothers and sisters in need can survive. They need your Zakat more than anything else.
Calculate your Zakat by using our Zakat calculator and donate with us to help those who need it most.