Application of Islamic System of Zakat

The Application of the Islamic System of Zakat in accordance to the Quran and Sunnah. Islamic Public Finance and some of its applications.
One who looks into the Shari'a for how to apply the system of Zakat and other forms of public property in Islam will immediately be struck by the fact that many financial and economic aspects of life have changed and entirely new phenomena have appeared (e.g. paper money, etc.) since the time of the Prophet (saw), and the righteous Imams. Therefore, we cannot simply look to the Qur'an and the Sunnah and books of Fiqh and find detailed instructions on how to apply these systems.

Fortunately Muslim scholars have not ignored such problem situations and have set out and defined the correct course to follow to arrive at the ruling of the Shari'a for those issues for which there is no explicit text. The science of "Principles of Jurisprudence" (Usul-ul-Fiqh) deals with many sources of rulings in such situations such as Analogy, Consensus (meaning the consensus of all living Muslim scholars on a ruling at any one point in time), and many other sources for determining the exact legal implications of the texts themselves as well as how to extend the rulings to things not actually mentioned or dealt with directly therein. Therefore, Muslims must first look to the Shari'a for guidance in any and all situations; "common sense" or a perceived benefit or common interest is not a valid source of rulings until all of the methods of derivation taken or derived from the divine revelation in its two parts (i.e. the Qur'an and the Sunnah) have been exhausted.

I have decided to write about the application of Zakat because of its being a pillar of Islam and because of the gross neglect that Muslims of our time have shown for this third pillar of Islam. There is a need for immediate steps to apply it in every Muslim community, group and nation - and among the Muslims as a whole. Many people have the mistaken impression that Zakat is an individual act and to be left to the individual to distribute. This is not the case. The Prophet (saw) said: "For every forty grazing camels (the Zakat is) one nursing female; the one who gives it seeking reward from Allah will get his reward. As for the one who hides it (or otherwise withholds it), verily we will take it from him and half of his camels (or "half his property") - a strict order from among the orders of your Lord!" (Narrated by Al-Baihaqy and Abu Daud with a strong chain of narrators).

I will summarize the types of public property in Islam and then go into detail on how to collect one of the three types of Zakat which should and can be implemented by Muslims in North America immediately and on a collective basis.

Public property in Islam falls into three categories: Zakat, Khums, and Fei. The first two are payments by Muslims to the Islamic treasury and are for the most part applicable by any group of Muslims with or without an independent state. The third category consists of monies coming from non-Muslims to our treasury and will not generally exist without an independent Islamic state. Each of the first two consists of three types briefly summarized below:


1. TYPES OF ZAKAT

A. Financial
Zakat on monies and merchandise at the rate of 2.5% of the amount owned continuously for one year provided it is above Nisab (see below).

B. Agricultural
Collected in kind in the time of the Prophet (sas) but may be collected in cash if that is more beneficial to the Muslims. Its rates are five percent (5%) on irrigated and ten percent (10%) on rain, river or spring-watered crops. It was taken by the Prophet only from wheat, barley, raisins, and dates; not from fruits, vegetables, onions, etc. It is to be taken by analogy from all foodstuffs which are normally dried and stored.

C. Grazing Animals
Zakat is fixed numbers of animals according to the total number owned. It is paid in kind or value thereof whichever is more beneficial. It is not a fixed percentage of total value, however.


2. TYPES OF KHUMS

A. Exploitation of Mineral Deposits
Twenty percent (20%) of the total product is due to the treasury of the Muslims after subtracting expenses incurred. It can be paid from refined product or value.

B. Buried Treasure
Whenever a Muslim finds any buried or hidden treasure (and other types of "finds" by analogy) known not to have belonged to a Muslim, he must turn over twenty percent (20%) of it to the treasury. The remaining 80% belongs to the finder. If it is known or possible that the property found belonged to a Muslim or a protected individual, it is called Luqata, and has an entirely different ruling.

C. Spoils of War
All non-fixed wealth, whether money, supplies etc. acquired by a Muslim army during a war is subject to a levy for the treasury. Twenty percent (20%) must be paid to the treasury, and the remainder is to be divided among the soldiers. The leader of the army can, however, favor certain individuals with small amounts of this property above their shares for exceptional bravery or effort.


APPLICATION OF "FINANCIAL" ZAKAT

1. The Question of Nisab
The Nisab of Zakat for money and merchandise - which are neither gold nor silver - is the current market value of 19.13 Troy ounces of pure silver. At the time of this writing (1983), that is about $152.00 U.S. dollars. The Prophet (saw) said: "...There is no Zakat due on less than five ounces..." (i.e. of silver). Narrated by Muslim and others. Note: An ounce in the time of the Prophet (saw) equals approximately 3.826 Troy ounces.

There is a separate Nisab for gold which is 2.73 Troy ounces. Some scholars say that it is not required to add an amount of gold less than (its) Nisab to silver or merchandise. Because of the fact that adding these partial amounts will be more beneficial to the recipients of zakat, and is safer in terms of being sure that the obligation has been fulfilled, it is better to combine any mineral wealth less than its Nisab with all other types of wealth in its category, and consider it as one account. Because of this difference of opinion, however, if you own gold less than its Nisab, you may choose not to add it to your other properties - unless, of course, you intend to sell it in which case it is Merchandise, and must be counted.

2. Why Silver and Not Gold?
The Nisab of silver should be used as the criteria in determining if Zakat is required or not on forms of wealth which are neither silver nor gold (e.g. dollars), and not that of gold. Two reasons for this are as follows:

First: The evidence from the Hadith is much stronger - there is no text narrated directly from the Prophet (saw) giving the Nisab of gold, a fact which led some scholars to believe that the Nisab of gold might have been derived (via the exchange rate) from the Nisab of silver. This is, in fact, highly plausible since 2.73 oz. of gold (i.e. 20 Dinars) was approximately equal in value to 19.13 oz. of silver (i.e. 200 Dirhams) during the time of the Prophet (sas).

Second: Using silver as the criteria removes any doubt about whether or not Zakat due has been paid. This is because the Nisab of silver is much lower in value at the present time than that of gold. Ibn Khuzama narrated from the Prophet (saw): "When you have paid the Zakat of your wealth you have (thereby) driven its evil away from you." Also, there is a general rule cited by the scholars in many analyses of Zakat issues which states that, when in doubt, that which is more beneficial to the poor and needy in society is preferred.


3. Items Needed for Zakat Calculation
In order to pay his or her Zakat, every Muslim must take accurate account at least once a year (the collection date) of the following items. The form at the back of this document can be used for calculating Zakat, and the numbers on the following paragraphs refer to the items on the form.

(1) Cash: all cash in your possession on the day of account taking.

(2) Bank Balances: Interest bearing accounts should be gotten rid of immediately -- or be notified that you are at war with Allah and his Prophet (sas) (See, Qur'an 2:279). Alternatives should also be sought for non-interest (checking, etc.) accounts as soon as possible as this supports the system of Riba (interest), and adds to its wealth at the expense of the Muslims. The alternatives are really very simple, and the whole of the Muslim Ummah bears the blame for not making meaningful progress in this area.

(3) Any other form of "money" (in its widest sense), e.g. stocks, investment portfolios, etc.

(4) and (5) Any and all debts owed to you whether business or personal - unless you have given up on collecting. However, if you ever collect such debts, you must pay Zakat on all the years which have passed.

(6) and (7) All gold and silver owned by you in any form except women's jewelry which is actually being used. There is a difference of opinion about the latter going all the way back to the Companions of the Prophet (saw). There is compelling evidence on both sides. However, even though the stronger view is that it is not obligatory, it is advisable to pay it, being the more cautious route, especially if a large amount is involved. Use current market value of the gold itself (not including the handiwork).

(8) The current value of any and all merchandise owned by you which you intend to sell. Use the market value of these items on the day of account taking. Use the wholesale price generally, i.e. what you could get for them if you had to liquidate them as a lot, not what you might get if you retailed them one by one over a long period. This does not include raw materials which you intend to manufacture or consume in a manufacturing process. It also does not include items owned by you for the purpose of renting or hire such as taxi cabs, ferries, or apartment buildings. Naturally, if anything remains from the income of such items, it will fall into one of the above cate- gories.


At this point: Add up all of the above figures and then subtract:

(9) All debts owed by you to others. However, it is strongly recommended that you pay these debts before account-taking as it has been narrated that Abu Bakr said in front of a group of the Companions: "This is the day of your Zakat, so pay your debts and pay the Zakat due on the remainder." None of the companions objected to this statement. If you owe a very large sum, which you are paying by installments, count one year's worth of payments. If you owe any sums which are past due and have not been paid, though you have had the ability to pay them, repent to Allah for this very serious sin. Seek the means to pay all such debts immediately (to complete your repentance), and if you cannot, still, do not subtract them from your Zakat balance. The Prophet (saw) said: "The delay of one able to pay is injustice (Dhulm)."


4. Calculating Your Zakat
Zakat is due at the rate of 2.5% on the total value of all property of the above types which has been in your possession for one full year (i.e. from one Zakat due date to the next), provided that this total value is more than Nisab. It is narrated by several strong chains of narration that both the Prophet (sas) and several of his companions said: "There is no Zakat on property except that on which a year has passed." (i.e. in your possession).

Therefore, since you have taken accurate accounts of your properties subject to Zakat every first Muharram, you should look at this year's total, and last year's total and pay your Zakat on the lower of the two figures, this being the amount that has been in your possession for one year. This figure may be lowered, however, if you know for certain that your total was even lower at any point during the year - use the low peak as your figure. For example if, at any point during the year your total was less than Nisab, there is no Zakat due since you have not owned Nisab for on full year. Remember, however, that hiyal (tricks) are not acceptable in Islam, so if you simply transferred your property to a non-subject item (such as diamonds), or to another person and then back to you, this does not exempt you from Zakat. In the first example because such properties become "Merchan- dise" (because of you intention to sell them) and never leave the account of Zakat properties. In the second example, because this is a "Hila" (legal fiction) and not acceptable. In any case, it is a very good idea to take your account at several points during the year especially if you think you may be at a "low".

On the other hand, it is commendable though not obligatory to pay Zakat on your collection- day total even if it is higher than last year's total or even if you have gone below Nisab during the year. Abdur-r-Razzaq narrates: "The Companions deemed it commendable, when Zakat comes due to pay it on all of one's property." Also, Al-Hassan Al-Basry said: "When the day comes which one has appointed for the paying of Zakat, he should pay it on all that he owns." This cannot, of course, be considered evidence that it is obligatory even though Al-Hassan phrased it as an order, as that would be in contradiction to the above correct Hadith which is a much stronger type of evidence. The phrase "the day...one has appointed" also reflects a difference between the Prophet's (saw) time and that of Al-Hassan, since in the Prophet's time, as we have seen, Zakat was collected by represen- tatives of the ruler, and not left to the individual to "appoint" the collection date.


5. Implementation
Finally, it will be necessary, in order to accomplish implementation of this Pillar of Islam to appoint people from the community to administer the collecting and spending of Zakat monies. They must take accurate account of all transactions which must be open (without names) to inspection by concerned members of the community, or protected by other checks and safeguards. These administrators are to be paid a fair wage from the Zakat money itself, according to the services provided, as Allah has ordered in the Qur'an. They should also offer counselling to help individuals do their Zakat accounting correctly. The practice of collecting membership dues and neglecting Zakat has no basis in Islam.

As you can see, the way of the Sunnah is beautiful, simple, easy to understand and not beyond the ability of any individual or group to put into immediate practice. What will be our excuse before Allah if we continue to pray, fast and make pilgrimage but also continue in our neglect of the Third Pillar of Islam? There is a great reward for reviving any Sunnah of the Prophet (saw) which the people have neglected or forgotten. This is a Pillar which has been neglected, and deserves our utmost attention and effort! I ask Allah to bless the Muslims in this and all efforts to obey His law. And may His Prayers and Salutations be upon His final Prophet (saw), his people and companions, and all those who take his Sunnah as their way of life in preference to all others. Amin.