Zakaat Calculations

Zakaat must be paid by Muslim adults who are mentally sane and in possession of an amount of wealth [net assets] above the Nisab. The word Nisab means the minimum amount of property or wealth/assets that must be owned by a Muslim before he/she is obliged to start paying Zakaat. This minimum amount is called the Nisab threshold. You first become eligible to pay Zakaat the day your wealth hits the Nisab threshold. The Zakaat is calculated and paid on the wealth of a person after a full lunar/Islamic year. A lunar year is around 354 days long.

The moment you possess wealth above the Nisab threshold you become eligible to pay Zakaat. However, no payment is due on that date itself. The Zakaat is to be paid after one full lunar year – but only if your wealth at that future date is still above the Nisab threshold. It does not matter if your wealth decreases or increases during the year. It is the value of your wealth/assets at the end of the lunar year that is used to calculate and pay the Zakaat (if it still exceeds the Nisab).

Your Wealth or Net Assets can be summed up as the liquid assets you possess minus your short-term liabilities. Liquid assets are those that can be transformed into cash very easily. Short term liabilities include your bills, rent, personal loans and credit card debts. Most scholars agree that any mortgage that you may hold, should not be included in that calculation.
Here’s what should be included in your Assets:
− Cash in the bank and at home.
− Cash saved for any special purposes e.g. wedding, hajj, car purchase, etc.
− The value of Gold and Silver you own.
− The value of Shares at their market price
− Money owed to you, which is highly likely to be repaid.
− If you own a business, the balance sheet value of the Stock you possess.
− If you own properties, any rental income that’s been saved.
You do not have to count the value of your home or land as part of your assets. Also, you don’t have to include personal items, such as a car, clothing, home appliances, etc. as part of your assets.
If you own investment properties (bought to let), then any saved rental income will be a part of your assets. The equity value of your investment property portfolio is not included as part of your assets in the Zakaat calculation.
If any investment property is due to be sold around your Zakaat due date, then the anticipated profit is to be included as part of your assets.

Shares and Property:
If you possess shares for the purposes of trading, then you must include their value your wealth/assets. However, if the shares you possess are not for trading, but rather held as an investment to deliver dividends, then it is only the dividends that need to be counted in your assets. The same rule applies to property trading. If a property is purchased with an intention to resell it, then its value must be counted in your assets. However, if a property is bought as an investment (for example to be let out) with the only benefit being the rental income, it is only the profit from the investment that is eligible to be counted under your assets.
Business Goods and Stock
Business stock must be counted as an Asset for Zakaat purposes. The value to be used is what would appear on your Balance Sheet. Usually, it is the cost of purchasing the stock. Business premises does not need to be counted as an Asset in the calculation. Any property the business owns [land, retail units, etc.] also don’t need to be counted as Assets.