Zakat Research

In the Name of Allah The Merciful, The Mercy-Giving.

Introduction

The following are quotes from Dr. Monzer Kahf translation of Dr Y. Al Qaradawi Book ‘Fiqh Al Zakat’

” As for the issue of zakah, there is very little concern for its research by scholars. Such an important matter like zakah still needs more study and research, especially since it is one of the fundamental obligations of Islam and a cornerstone of its financial, economic and social system.
2. Muslim jurists differ on many details of zakah. Each has his own opinion and arguments, and there are sometimes contradictions among their interpretations, which leaves the majority of people in chaos and confusion about what opinion to choose.” 

Dr. Al Qaradawi added:

^{a   b}

Zakat (also written Zakah) is due on agricultural crop, money ^c, merchandise and on grazing cattle ^d. The amount and from where it is taken; differ for each form of money.

For Agricultural produce, zakat is taken from the crop, which is the yield of the land and the effort put in farming it. So zakah here is taken from the growth.

For the money (cash and property), zakat is taken from the money itself at the end of every year, i.e., it is taken from the capital (not from its growth), as there are no growth here.

Finally for the domestic grazing animals, zakat is taken from the herd once every year, as the count includes the newly born, it is taken from both the capital and the growth.

The question: Is Zakat imposed on Capital or on income? was answered by scholars from the various schools (Mazaheb), that Zakat is imposed on growing capital and on capital capable of growing (although it did not grow).

In this research, we differ with this principal; we are of the opinion that Zakat is imposed only on earnings, and in case of investment it is the imposed on the growth of the invested capital, not on the capital itself. Our reasons are derived from the holy Quran and Hadith. We will present our reasons and explain how the zakat on cash and the zakat on grazing cattel which are taken from the capital; can also be explained as they are in reality zakat on income, similar to the zakat on crops which is taken from the growth (which is the yield / income).  

Al Zakat

In Quran, the new Arabic word Al Zakat was introduced to the Arabs for the first time to mean the obligatory charity. الصدقة المفروضة  The meaning of the word Zakat (which is derived from Zaka) indicates growth, and the early scholars have found this growth in both agriculture and in grazing cattel, but could not find it in cash money النقود.

In the beginning, Moslems were instructed to pay charity from surplus money they may have, {They ask you what to spend, say the Afou} 2/219   Al Afou is the increase and the surplus. This was before the zakat became obligatory and defined in Quran, Sunnah (Sunnah فعلية and Hadith).

The following Quran verse refer to Zakat and determine it is obligatory :

{Of their money, take alms (sadaqah), that so thou mightest purify and sanctify them; and pray on their behalf..} 9/103

The following Quran verse define of which money Zakat is taken:

{O you who have believed, spend from the good things which you have earned and from that which We bring forth for you from the earth.} 2/267

This Al Baqara verse 267, states the money from which Zakat is taken, is the money you earned, indicating it is any new money you receive as a result of work, investment, growth, ..etc., it is not the capital or the wealth you already have. The following verses indicate that Earnings are different than any owned wealth, property, money or capital.

يقول تعالى { ما أغنى عنهُ مالُهُ وما كَسَبَ } آية 2 سورة 111

{His money will not avail him and that which he earned (or gained)}.

{وما تدرى نفس ماذا تكسبُ غداً}. آية 34 سورة لقمان 31

{And no soul perceives what it will earn tomorrow,}^e

From above, it is clear that the word used in Quran ‘Kasaptum’ from ‘Kasb’, indicates earned and earnings, which define the money from which zakat is taken as a new money you earned, it is not your wealth you already have. (However, as will be stated hereafter, you must invest all surplus money you have, and whatever you will earn from such investment, will be subject to zakah)

Is Zakat taken from the Capital (wealth) or from its Growth:

Early scholars concluded that Zakat is due from all growing money and from all money capable of growth, even if it did not grow. On the other hand, other money which is not a surplus to a person living costs and needs, such as the house, the car and all money needed to meet his and his family living expenses, is not subject to paying zakat.

Ibn Rushd wrote in his introductions page 201 “Al Zakat was named so, because it is only taken from the money intended for growth, not from the kept property. Zakat in language is Growth and was named accordingly because it is related to it.”

Al Zaylai الزيلعى in his book ‘تبين الحقائق شرح كنز الدقائق’ page 253 on the reason why the condition of one year must pass before a kept money become subject to zakah;  “Because the due [for zakat] is part of the surplus not from the capital, for Quran verse {They ask you what to spend, say the Afou} meaning the surplus and growth, and it most likely occurs in a year, so the apparent cause which is the passing of a year is used in place of the true cause which is the growth” 

The scholars concluded that zakat is taken from the money intended for and capable of growth. Which is not what verse 267 surah 2 stated, {spend from the good things which you have earned and from that which We have produced for you from the earth}, which indicates the money from which zakat is taken is ‘earnings and what produced from earth’, indicating growth and not capital or wealth. Look at Al Zaylai statement : “Because the due is part of the surplus not from the capital”. But the scholars did not put the appearance of growth تحقق النماء  as a condition, and ruled that Zakat is due on all surplus money capable of growth, even if no growth is achieved, thus made zakat due on capital.

The reason of the scholars taking this view, could be seen in the zakat on the gold and silver coins  زكاة النقدين, which is taken from the capital after a year passes ^f, and the zakat on the grazing livestock زكاة السوائم , which is also taken from the capital and its growth, annually at the end of each year.

But the Quran verse 267:2 is indicating clearly that zakat is taken from earnings, not from capital. In addition, zakat on agricultural land and plantations, is taken from the crop, which is the yield (growth) of the land, and is taken on the day when such growth appears (the harvest), { Eat of its fruit when it yields and give its due [zakah] on the day of its harvest} verse 141 Surah 6. We notice the condition of the one year is not required here.

The Zakat on the agricultural land is taken from Growth and not from the land, so we could say here that Al zakat is taken from the growth, if and when it occurs, at a rate of 10% of such net growth. If the harvest failed, and no crop appeared, then there will be no zakat on this land, in other words, no zakat on the capital, which -in this case- is the land.

‏ “‏ فِيمَا سَقَتِ السَّمَاءُ وَالْعُيُونُ أَوْ كَانَ عَثَرِيًّا الْعُشْرُ، وَمَا سُقِيَ بِالنَّضْحِ نِصْفُ الْعُشْرِ ‏”‏‏.

The Prophet (ﷺ) said, “On a land irrigated by rain water or by natural water channels or if the land is wet due to a nearby water channel Ushr (i.e. one-tenth) is compulsory (as Zakat); and on the land irrigated by the well, half of an Ushr (i.e. one-twentieth) is compulsory (as Zakat on the yield of the land).”

Now we have a simple rule, supported by Quran and Hadith, applies to one form of economical investment activity. As the condition of equality, necessitate that zakat shall apply equally to all forms of  investments, being either trade, industry, farming,….etc., in order for the national economy to achieve a balanced growth, where no sector be preferred while the others deprived of capital, we assume that the zakat of the tenth of the net growth should apply to all other investments in whatever economical fields money may be invested.

As we said, what contradict this assumption, is the zakat on gold and silver coins, which is quarter of one tenth, and this money was not invested and accordingly did not grow, and zakat here is taken from the capital. And similarly the zakat on the grazing cattle, which is taken from the cattle itself.

We will provide hereafter analysis of the zakat due on these two forms of money/ property:

Zakat on the Gold & Silver Coins:            زكاة النقدين

(More known as zakat on the 200 Dirhams (Silver)  and on the 20 Dinars (Gold)   )

All Money & Wealth belongs to Allah, Allah entrusted and delegated us to use this money in the way as directed in the Quran and Sunnah {Believe in Allah and His Messenger and spend out of that in which He has made you successors} verse 7 Surah 57.  Al Qurtoby القرطبي said : “this is a proof that the ultimate owner is Allah, and man have no choice but to deal with the money in accordance with what is accepted by Allah, and his reward will be paradise”

We are strongly prohibited from hoarding our money and keeping it out of work. Many verses in Quran and Hadith direct us away from hoarding which is considered sin. On the other hand, if there was a surplus in the money, we are instructed to invest this surplus and cause it to grow, Should every body invest his or her surplus money, this will lead to a strong economical activities, leading to a prosperous economy which in turn will create many work and employment opportunities, so the needy and the poor will find work and earn wages saving them from the need to ask for charity.

If one hoarded the surplus money (entrusted to him by Allah), and did not invest it or contract it to an expert to invest it for him, then he is obliged to pay zakat from the money even if the money did not grow. The explanation of that could be found in the Mudarabah Contract ^g. If you give a Mudareb (Working Partner) a capital to invest for you and you agreed to equally share the Mudarabah profit, and if the Mudareb neglected your money and did not invest it, and kept it idle during the period of the Mudarabah, he is in breach of the contract, and he is obligated to return your capital and to pay you from his own money, an equal amount to what was your share of the profit, (calculated equal to achieved profit of a similar Mudrabah or as decided by a Judge, See Mudarabah conditions of contract in the Mudarabah section of this website). This is because the Mudareb, as a result of his failure to invest your money, have caused you to lose profit, so he is responsible to compensate you for such loss, from his own money.

If we apply the same condition, on the money entrusted to us by Allah, on the condition that we invest the surplus and thereafter give one tenth of its profit (growth) to the poor (as zakah).  If we invested the money and made a profit we pay one tenth of such profit to the zakat eligible receivers. If we neglected to invest the money, and the proof of our neglect is keeping the money idle for one year, then we defaulted on the condition mentioned above, and therefor we are obligated to pay the tenth of the ‘similar profit’   ربح المثل to the zakat eligible receivers. Similar profit is estimated to be 25% of the capital, accordingly tenth of this 25% is 2.5% which is the same quarter of the tenth due zakat on all surplus money which stayed idle for one year, as per the mentioned Hadith Sharif.

Here, it is clear the importance of the one year condition, which is the proof that the money was kept from investing, and thus a breach of the condition was committed.

The Prophet (SAW) said: (No zakat in money till one year passes), Ibn Maja (17). The money here is not earnings, profit or crops, ^h. It is the capital, ⁱ, that is why there are no zakat on such capital till it is proven that it was kept idle for one year, only then it will be treated as kept money and zakat will be due as tenth of the similar profit, estimated at 25% of the capital. The year is taken as such, because a person may delay investing the money for several months till the market conditions become favorable, so he is allowed to delay part of a year. However, a full year will clearly show that he defaulted and failed to invest the money.

The above explain that the basic rule for the silver and gold coins, is to invest the money and pay one tenth of the net growth for zakat. If no growth is achieved, then no zakat is due. On the other hand If failed to invest, and the proof of such failure is keeping the money idle for one year, then you pay zakah 2.5% of the capital (ten percent of the estimated similar profit).

Zakat on Grazing Livestock:      زكاة السوائم

For the zakat on this property, in the early years after Hijra, we assume the new religion needed to explain the zakat amounts to be taken from their grazing livestock (Camels, cows, goats, sheep,..). Either take the tenth of the growth if easily determined, or make an approximation or estimate of such tenth.

The growth is not only the newly born, if it is, it could have been easy to determine the growth, you count the herd at the start and at the end of the year, but this is not all. Growth is also the aging of the herd (value of camels increases with age up to certain age), counting will not be enough then, we will need to list age of each one at the start of the year. Then there are the milk, the wool, the ghee and the other benefits, all of which represent an income (part of the growth). The new religion simplified the amounts due under this charity, not to trouble the early Muslims and to make it easy for them, it provided them with simple numbers taken from the capital and growth, which is presented in the zakat table on what is due from Camels, Cows & Sheep’s. 

Even today, with all our science and calculation tools, we will find it extremely difficult to accurately calculate such growth, because the growth includes yields such as milk, wool, ghee, meat, skin in addition to newly born and aging. On the other hand there are the dying and the slaughtered for its meat. All these are variables difficult to keep track of or to measure, the time zakat is a charity meant for simplifying not adding burden on people. If it was difficult to calculate, such exercise will be costly and consume from its value, and because its small amount does not justify such complications, it is practical and wise to be imposed in the form of the tables which are easy to understand and apply. But this should not be understood as a zakah on the capital, because it is zakat on the growth, but calculated in a simple tables to be taken annually from the herd after so everyone can easily apply it.

Further analysis of the said tables are shown in the Arabic language article.

The Prophet (SAW) Hadith:

(مَنْ وَلِىَ يَتِيمًا فَلْيَتَّجِرْ لَهُ وَلاَ يَتْرُكْهُ حَتَّى تَأْكُلَهُ الصَّدَقَةُ)

(Whoever is entrusted with money of an orphan should trade with it and should not leave it sitting to be used up by Zakah) (Tirmidhi)

The meaning here is that the trustee shall not keep the money idle, because if it was left idle, he will have to pay zakah every year from the capital, which will use up the money, (if kept from investing the capital will go down by fifth in 10 years and by 40% in 20 years), and this will result in a great loss to the orphans and great harm to the national economy. On the other hand, if the trustee invested the money and made profit, he will pay zakat from the profit and the capital will stay intact.

(ما نقص مال من صدقة)

(Charity does not decrease money)

Here, is another confirmation that zakah is taken from growth and not from capital, that is why zakah will never cause the capital to decrease. Zakah is only taken from a capital when the owner fails to invest it. Accordingly it is not the zakah that reduced the money, but the failure of the owner to invest it is what caused it dilapidation.

From the above, it is reasonable to propose that Zakat is an obligatory charity levied on net growth. 10% of net profit; applicable on all types of money and to all fields of investment activities. Zakah shall be taken as and when such profit occurs (but after the return of the initial capital and deducting all costs). Further reviews and studies should follow in order to confirm this simple rule.

We must draw the readers attention here, that this research and its conclusion are published herein with a view to put out to the jurists and scholars for review and discussion, and that this research is an Ijtihad and its conclusion shall not to be followed or implemented, until it is authorized and agreed by the majority of scholars, and until it is issued as  a clear Fatwa by an accepted and acknowledged Muslem Authority, and until we reach this Fatwa,  Muslims shall continue following the current known rules of Zakat in accordance with the accepted views of the majority of the old and the contemporary Scholars.

Please find more studies and analysis on this subject in the Arabic language version in this website.

1. Fiqh Al Zakat, Dr. Y. Al Qaradawi, Translated by Dr. Monzir Kahf, King Abdul Aziz University. Jeddah, Kingdom Of Saudi Arabia.  (back)
2. ويضيف فضيلة الدكتور القرضاوي في كتابه فقه الزكاة، تحت باب المال المستفاد: “”ولقد عانيتُ بنفسي من اختلاف المذاهب فيما بينها في هذا الأمر، واختلاف الأقوال والطرائق داخل كل مذهب، واختلاف التصحيحات والترجيحات لكل منها، ووجدت عشرات من المسائل وعشرات من التفريعات عليها، تتعلق بما يُستفاد من المال، وأقسامه وأنواعه، هل يُضم إلى ما عنده أو لا يُضم، أم يُضم البعض دون البعض، هل يُضم في النصاب أم في الحَوْل أم كليهما؟ تذكر بحوث حول هذا الأمر في زكاة الأنعام، وفى زكاة النقود، وفي زكاة عروض التجارة، وفي فروع أخر ؛ مما جعلني أستبعد أن تأتي الشريعة السمحة الميسرة التي تخاطب عموم الناس، بمثل هذه التفريعات المعقدة الصعبة في فريضة عامة يُكلَّف بها جمهور الأمة. “”  (back)
3. زكاة النقدين  (back)
4.  السوائم    (back)

5.   كسب (مقاييس اللغة) الكاف والسين والباء أصلٌ صحيحٌ، وهو يدلُّ على ابتغاء وطلبٍ وإصابة. فالكَسب من ذلك. ويقال كَسَب أهْلَه خيراً، وكسَبْت الرّجلَ مالاً فكَسَبه.       (back)

6. قال النبي صلّى الله عليه وسلّم: «لا زكاة في مال حتى يحول عليه الحول» [(17)] أخرجه ابن ماجه   (back)
7. Al Mudarabah is the transaction where a capital owner who have no experience or ability to invest his money, give it to a company or an experienced business man to invest it for him, and the share the profit after returning the capital  (back)
8. which its zakat is due on the day it is harvested  (back)
9. which is above the Nisab  (back)