Question # 205: How zakat will be calculated? If a person gave zakat last year on some amount n next year his taxable amount increased further but the excess amount doesn’t fall in the criteria of one complete year so how someone will calculate zakat?

Bismi-llahi r-raḥmani r-raḥīm,

Assalamu ‘laikum warahmatullahi wabarakatuh,

All praise and thanks are due to Allah (سبحانه و تعالى), and peace and blessings be upon His Messenger (صلى الله عليه و سلم).

Dear questioner,

First of all, we implore Allah (سبحانه و تعالى) to help us serve His cause and render our work for His sake.

Shorter Answer: Zakah is due on money which reaches the nisaab (minimum threshold) and one full hijri year has passed. The nisaab is equivalent to 85 grams of gold or 595 grams of silver and Zakah is paid at 2.5%. The money which reaches the nisaab, and then increased during the year, zakah has to be paid in the following manner:

  1. If the increase stems directly from the original amount, such as if the initial amount was invested, which earned this increase, then one should pay zakah on the entire amount at the end of the year.
  1. If the increase was acquired by means of inheritance/gift, sale proceeds or earned gradually during the year from the saving of a salaried person or rental income, one has the following choices:
  • Pay zakah for each sum separately when its year has passed, which will entail hardship, as one will be paying zakah several times in one year.
  • Or if one wants to pay its zakah on the whole amount, i.e., pay zakah in advance for the money for which a year has not yet passed. This will bring a greater reward and raise him higher in status.

It is worth mentioning that it is not necessary for this increment during the year to have reached the nisaab, because the nisaab has already been reached by the original amount. 

Long Answer: The Muslims of the earlier and later generations are agreed [on the matter] that zakah must be paid each year on gold, silver, [cash] and the like. 

In order for zakah to be due on money, two conditions must be met:

  • That it reaches the nisaab (minimum threshold)
  • That one year has passed since it reaches the nisaab.

If the money is less than the nisaab, then no zakah is due on it.  If it reaches the nisaab, and one year has passed, i.e. a lunar (hijri) year has passed since the time when it reached the nisaab, then zakah becomes due at that point. The nisaab is the equivalent of 85 grams of gold or 595 grams of silver.  The rate that must be paid for zakah is one quarter of one tenth (2.5%).

[Now for example,] if the money reaches the nisaab and it is US$ 1000, then at the end of the year it becomes US$ 5000, zakah [has to be paid in the following manner depending on the situation]:

  1. If this extra amount stems directly from the original amount, such as if the [initial] US$ 1000 was invested, which earned [another] US$ 4000, then one should pay zakah on the entire amount at the end of the year, because the profit on money is connected to the capital.
  1. If this extra amount did not stem directly from the original amount, rather it is money that was acquired by different means, such as an inheritance or a gift, or [sale proceeds of something], and so on, then a separate year should be counted for it, starting from the day when one took possession of this extra amount. But if one wants to pay its zakah [along] with the [initial] US$ 1000, in advance, there is nothing wrong with that.
  1. If this extra amount came gradually, such as money that a person saves from his salary, so one saves US$ 500 one month, and US$ 1000 another month, until at the end of the year one has collected US$ 4000, [in which case, one has] the choice of paying the whole amount when one year has passed for the US$ 1000, [and pay] zakah in advance for the money for which a year has not yet passed, or one can pay the zakah for each sum separately when its year has passed, but this entails some kind of hardship, as one will be paying zakah several times in one year. [In other words, whatever is saved during Ramadan, one should pay zakah on it in the following Ramadan, and whatever is saved in Shawwal, one should pay zakah on it the following Shawwal, and so on. It is worth mentioning that it is not necessary for this new money to reach the nisaab, because the nisaab has already been reached by the first amount of money (US$ 1000)].

[Nevertheless], it is easier for one to pay zakah on all his saving during the year, when one year has passed since his money first reached the nisaab. In that case, one will be paying zakah on money for which one year has not yet passed, but there is nothing wrong with that, because it comes under the heading of paying zakah in advance before one year has passed.

To corroborate the above, it is said in Fataawa al-Lajnah al-Daa’imah [Fatwa of the Standing Committee]:

[With regard to a person who owns money that reaches the nisaab then acquires other money at different times which does not stem from the first amount of money, and is rather separate from it, such as the salary that is paid monthly to an employee, or an inheritance, gift or rent paid on property, etc.…] “…if he insists on having all his rights and on not giving any charity to those who deserve it apart from what he is obliged to give, then he should make a schedule of his earnings and write down every amount and the date on which he took possession of it. Then he should pay zakah for each amount separately when one year has passed from the date on which he took possession of it.

But if he wants an easier method, and wants to be more generous and give precedence to the poor and others who are entitled to zakah over himself, then he can pay zakah on all the money he possesses when one year has passed from the date when his wealth first reached the nisaab. This will bring a greater reward and raise him higher in status; it is easier for him and is more generous towards the poor and needy and others who are entitled to zakah. Whatever extra amount he may pay will be regarded as a “down payment” [advance payment] on the zakah for any wealth for which one year has not yet passed.”

(The above reply is based on various answers by Islamqa.info)

Allahu A’lam (Allah (سبحانه و تعالى) knows best) and all Perfections belong to Allah, and all mistakes belong to me alone. May Allah (سبحانه و تعالى) forgive me, Ameen.

Wassalaam