How to Calculate Zakat on Cash, Gold and Business

Zakat is one of the five pillars of Islam: a fixed share of your savings that you give to eligible people every year. Most people know the number, 2.5%, but get confused about what to count, when it is due, and how much you need before it applies. This guide walks through it step by step.

Step 1: Check if you reach the nisab

Nisab is the minimum wealth you must hold before Zakat becomes obligatory. It is defined in two ways:

• Gold nisab: 87.48 grams of gold (7.5 tola).
• Silver nisab: 612.36 grams of silver (52.5 tola).

Silver is much cheaper than gold, so the silver nisab is a far lower amount. Many scholars, and many fatwa bodies, advise using the silver nisab for cash and savings because it is safer for the poor and it is the lower threshold. If you only own gold and nothing else, the gold nisab is the usual reference. Use today's price on the gold price calculator and multiply by the weight above to get the nisab in your currency. Do not rely on a figure you saw last year, because prices move.

Step 2: Wait for the hawl (one lunar year)

Zakat is due only after your wealth has stayed at or above the nisab for one full Hijri (lunar) year. The Islamic year is about 11 days shorter than the Gregorian year, so your Zakat date shifts earlier each year on the English calendar. Pick a fixed date, often 1 Ramadan, and calculate on that day every year. If you are unsure of your date, the Hijri date converter helps.

Your balance may go up and down during the year. What matters in practice is that you were at or above nisab at the start and at the end of the year; most people simply total up everything they hold on their Zakat date.

Step 3: Add up what is zakatable

Counts toward Zakat

• Cash in hand, bank accounts, mobile wallets (JazzCash, Easypaisa and similar) and savings certificates.
• Gold and silver, including jewellery. Under the Hanafi view, jewellery is zakatable even if you wear it.
• Business stock for sale, valued at the current market (selling) price, plus cash of the business.
• Money lent to others that you expect to get back. Doubtful debts become due once you actually recover them.
• Shares and investments held for trading, at market value. For shares held long-term for dividends, many scholars count only the zakatable portion of the company's assets, so ask a scholar.
• Foreign currency, valued in your own currency on your Zakat date using the currency converter.
• Money set aside in a provident fund that you can access.

Does not count

• The house you live in, your personal car or bike, furniture, clothes and household items.
• Machinery and tools used to run a business (but what you produce for sale is counted).
• A plot you bought to use or build on yourself. A plot bought to resell is business stock and is counted.
• Money you actually owe by the due date.

Step 4: Subtract short-term debts

Deduct debts that are due now: credit card bills, rent owed, unpaid salaries, instalments due in the coming period. Most scholars do not deduct the whole remaining loan, only the instalments currently due. Ask a scholar if you have a large home or car loan.

Step 5: Multiply by 2.5%

If your net zakatable wealth is above the nisab, pay 2.5% of the whole amount, not just the part above nisab. That is the same as dividing by 40.

Worked example

Ayesha has the following on her Zakat date:

Item	Amount
Savings account	450,000
Cash at home	50,000
Gold: 5 tola at 300,000 per tola (illustrative price)	1,500,000
Lent to her brother, expected back	200,000
Less: credit card bill due	-40,000
Net zakatable wealth	2,160,000

Zakat = 2,160,000 × 2.5% = 54,000. The gold price here is only an example to show the method; plug in the real price on your Zakat date.

Country note: Zakat deducted by banks (Pakistan)

Some countries deduct Zakat automatically. Check whether yours does; Pakistan is one example, described below.

Under the Zakat and Ushr Ordinance, banks deduct Zakat at 2.5% from eligible savings accounts of Muslim account holders on 1 Ramadan, once the balance is above the nisab amount the government announces. You can avoid this deduction by submitting a declaration (affidavit) to your bank before the due date if your school of thought does not require it, or if you prefer to pay it yourself. Check the bank's deadline, because it is usually before Ramadan begins.

Important: a bank deduction only covers that account. Your gold, cash at home, business stock and other accounts are still your responsibility. Keep the deduction slip so you do not pay the same money twice.

Who can receive Zakat?

The Quran names eight categories (Surah At-Tawbah 9:60), including the poor, the needy, those in debt and travellers in need. In everyday terms, pay people who do not have nisab-level wealth themselves. You cannot give Zakat to your parents, grandparents, children or grandchildren, or to your spouse. Siblings, cousins and other relatives who qualify are allowed, and giving to a needy relative is often more rewarding. Zakat should be given as ownership to the person, so it cannot be used to pay for a building or a meal service in your own name without giving ownership. Also, Sayyids (descendants of the Prophet ﷺ) are traditionally not given Zakat in the Hanafi view.

Other things people ask

• Can I pay early? Yes. You may pay before the year ends, as long as you were above nisab when you paid.
• I missed past years. What now? Zakat is a debt owed to Allah. Estimate what you owed for each missed year and pay it as soon as you can, in instalments if you must.
• Is Zakat different from Sadaqah? Yes. Zakat is obligatory and has a fixed rate. Sadaqah is voluntary, any amount, any time.
• Agricultural land? That is Ushr, not 2.5%: usually 10% for rain-fed land and 5% for irrigated land at harvest. It is separate from the nisab-and-year rule above.

When you are ready, enter your assets into the Zakat calculator and it will do the totals for you.