The holy month of Ramadan is the time of giving. And there’s no better way to do this than with paying Zakat. Making up the five pillars of Islam, Zakat is the act of alms-giving by a Muslim to the needy in the Muslim community. The literal meaning of Zakat means ‘to grow towards God’ and is obligatory in the way of Islamic living. The applied rate is approximately 2.5% of the net savings and calculated according to the lunar calendar. Not all assets are eligible for Zakat, only those that are identified by Shariah Law such as cash, bank savings, trade-able business assets, mutual funds and stocks, jewellery and gold. Ultimately, Zakat can be viewed a good sign of achieving robust stewardship of finances for Muslims. As with the four other pillars of Islam, namely, Shahada (faith), Salat (prayer), Sawm (fasting) and Hajj (pilgrimage to Mecca), Zakat should be taken in an act of worship and with pure intentions.
Zakat Origins and relevance in today’s world
Zakat was prevalent in the time of Prophet Muhammed (peace be upon him). The wellbeing of the Muslim community at the time was already considered important so that those in extreme poverty were taken care of. Once Zakat became obligatory, the Prophet (peace be upon him) assigned Zakat workers to collect and distribute the Zakat.
The Holy Qur’an and the Sunnah are replete with exhortations of giving and who should receive Zakat, some of them being masaakeen (the destitute), fuqaraa (poor), aamileen-e-Zakaat (the Zakat collectors) and gharimoon (those in debt). The act of giving to them ultimately helps in the social and economic growth of Islamic countries. Several studies have been carried out on the benefits of the Zakat system on the socio-economic balance of countries, one such being “Zakat in Islam: A Powerful Poverty Alleviating Instrument for Islamic Countries.” [1]
If every Muslim were to give Zakat, children, widows, elderly and the poor will have their basic needs of living covered, which only contributes to the wellbeing of the community as a whole by helping to eradicate poverty.
Budgeting during Ramadan
While each person budgets according to their earnings, it remains a good practice to continue observing ground rules for keeping aside some of your salary. Here are some of the areas where proper financial planning will help you budget correctly for you and your family’s needs during Ramadan:
- Groceries: As the cost of fruits and vegetables tend to go up during Ramadan, make sure that you’ve taken this into your account when planning your weekly meals. There are many special offers that run through the course of the month, so find ways to reduce your costs. This is even more important if you’re planning to host iftar parties.
- Shopping: Curb your temptation to go overboard when buying clothes for you and the family.
- Dining out: Make a decision as to which iftars you’ll attend with your family and stick to them, otherwise you could end up spending excessively to dine out.
How to calculate Zakat
The amount of Zakat that a Muslim pays is related to Nisab which is the amount of earnings eligible for Zakat. At National Bonds, we help you make the right decisions when it comes to calculating Zakat correctly. Here are the basic steps of calculating Zakat correctly:
- Add all the assets that are applicable for Zakat
- Deduct all liabilities and payments from the above amount
- Multiply the number by 2.5% - this will be the Zakat amount due for payment.
Access your Zakat calculator on National Bonds here.
http://www.nationalbonds.ae/leads/calc/en/default.aspx?id=zakathcalculator