Year-end zakat is an obligation that must be fulfilled before the turn of the year. Zakat is the third pillar of Islam, a mandatory act that every Muslim must perform as an effort to purify wealth and worship Allah SWT.
Understanding Year-End Zakat
Zakat is the act of giving away a portion of wealth that has reached its nisab (minimum amount) or has been acquired and stored for one year. This portion of wealth is given out if it reaches the nisab and is paid at the end of the year or at the closing of the financial books. Zakat is derived from valuable assets owned such as gold and silver, from business or trade profits, from stock and investment earnings, or from owned companies, and so forth.
The obligation to pay zakat is carried out every year, whether it’s the Hijri or Gregorian year. Muslims in ancient times typically used the Hijri calendar to calculate their annual zakat. However, in modern times, some scholars agree and allow the use of the Gregorian calendar for annual zakat calculations. This is to facilitate traders, business people, and companies that use the Gregorian calendar in their accounting.
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Types of Year-End Zakat
Wealth comes in many forms and ways of acquisition. Every wealth that has reached its haul (period of one lunar year) and nisab, zakat must be paid. Below are some types of wealth that must be zakat-paid at the end of the year.
Year-End Zakat from Income
The obligation of income zakat or professional zakat is zakat derived from salaries or wages from employment. This type of zakat is one of the zakat maal (wealth) that must be paid if it reaches the nisab.
This type of zakat can be paid monthly after receiving a salary, but it can also be accumulated and paid at the end of the year. Thus, income zakat can also be categorized as year-end zakat.
Calculating Income Zakat
How much is the minimum income that must be zakat-paid? According to Fatwa of the Indonesian Ulama Council (MUI) Number 3 of 2003, the nisab of income zakat is equivalent to the price of 85 grams of gold. Here’s how to calculate the nisab of income:
First, find out the current price of 1 gram of gold, which can be done by visiting the Logam Mulia website. From the search results as of December 2023, the price of 1 gram of gold is IDR 1,118,000.
Second, calculate whether your income has reached the nisab? The current gold price multiplied by 85 grams of gold results in the minimum annual nisab amount. For clarity, here’s the calculation:
IDR 1,118,000 x 85 grams = IDR 95,030,000 (annual nisab)
IDR 95,030,000 / 12 months = IDR 7,919,000 (monthly nisab)
From this calculation, we find that friends with a minimum income of 7 million each month are obliged to pay zakat amounting to 2.5% of the income received.
Example: A worker has an income of IDR 8,500,000 per month, how much zakat should be paid?
Known nisab of 85 grams of gold = IDR 95,030,000 / 12 = IDR 7,919,000
Since the income has reached the nisab, zakat must be paid at 2.5%, which is: IDR 8,500,000 x 2.5% = IDR 212,500 per month
If you want to pay zakat annually, then simply multiply it by 12 months, resulting in IDR 212,500 x 12 = IDR 2,550,000.
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Zakat on Owned Wealth
Zakat on owned wealth is zakat derived from valuable assets that have reached the haul of one year. This wealth includes gold, silver, savings, stocks and investments. Each type of this wealth has a different method of zakat calculation, which we will discuss one by one.
Zakat on Gold
Zakat on gold has a minimum nisab of 85 grams. To calculate the amount of zakat that must be paid, first find out the value of 85 grams of gold. The current price of gold is IDR 1,118,000 x 85 grams = IDR 95,030,000. If the gold we have saved has reached 85 grams or more, then we are obliged to pay its zakat.
Formula to calculate zakat on gold: Value of gold exceeding the nisab amount x 2.5%
Example: Someone owns 90 grams of gold that has reached its haul.
Nisab: 90 gr x IDR 1,118,000 = IDR 100,620,000
Zakat: IDR 100,620,000 x 2.5% = IDR 2,515,500
Therefore, the zakat that must be paid from the 90 grams of gold owned is IDR 2,515,500.
Zakat on Silver
The nisab for zakat on silver is 595 grams or equivalent to IDR 6,903,785, based on the current value of silver. If the silver we own has reached or exceeded the nisab, then we are obliged to pay its zakat. Here’s how to calculate it.
Formula for zakat on silver: Value of silver exceeding the nisab amount x 2.5%
Nisab: 595 gr x IDR: 11,603 = IDR 6,903,785
Example: A Muslim owns silver worth IDR 8,000,000 and has reached its haul, how much zakat must be paid?
Zakat: IDR 8,000,000 x 2.5% = IDR 200,000 / year
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Zakat from Savings
Money we save can also be included in the wealth that must be zakat-paid. If the saved money has reached the haul and nisab equivalent to 85 grams of gold. Here’s how to calculate it:
The nisab for zakat on savings is the same as that for gold, which is 85 grams.
If someone has savings that have been stored for one year and have reached the nisab worth IDR 95,030,000, then that person is obliged to pay its zakat.
Formula: Ending balance x 2.5%
Example: A Muslim has savings worth IDR 10,000,000 and has been saved for more than one year. Then, that person is obliged to pay its zakat. The amount of zakat to be paid is as follows:
Zakat: 10,000,000 x 2.5% = 250,000
Therefore, the obligatory zakat to be paid is IDR 250,000
For friends who save their money in conventional banks, the way to calculate zakat is (ending balance – interest earned) x 2.5%. For example, a Muslim has savings in a conventional bank with an ending balance of IDR 25,000,000, and 2.01% of it is interest, then how much zakat must be paid?
Formula: (ending balance – interest) x 2.5%
The first step is to subtract the ending balance by the interest:
2.01% of 25,000,000 is 502,500
25,000,000 – 502,500 = 24,497,500
The second step is the result of subtracting the ending balance with the interest:
24,497,500 x 2.5% = 612,437.5
So, the amount of savings zakat that must be paid is IDR 612,437
Zakat from Stocks
Year-end zakat from stocks is the zakat that must be paid by a Muslim who owns stocks and has reached the haul and nisab. The nisab value for stocks is the same as that for income zakat, gold, and savings, which is equivalent to 85 grams of gold or IDR 95,030,000 at the current rate.
What about the calculation method? Here’s the formula for zakat on stocks:
Formula: 2.5% x (Capital Gain + Dividend)
Capital Gain is the profit difference between the purchase and sale price of the stocks. Meanwhile, Dividend is the profit from the company’s earnings distributed to shareholders.
Example of calculation:
If a Muslim owns several stocks and also frequently buys and sells stocks for one year, with an average profit of 3.5 million each month and the stock trading also yields an average value of 5 million, then how much zakat must be paid?
Known average dividend earned is 3,500,000 / month
Capital gain is 5,000,000 / month
Nisab = 5,000,000 + 3,500,000 = 8,500,000
Nisab = 8,500,000 x 12 = 102,000,000 (exceeding the nisab, so obligatory to pay zakat)
Zakat result on stocks = 2.5% x 102,000,000 = 2,550,000 (zakat that must be paid)
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Zakat from Asset Rental Investment
Zakat on asset rental investment by scholars is analogized to agricultural zakat. Thus, the nisab is equated with the value of rice weighing 520 kg. Some other provisions are that it has reached the haul and the zakat rate is 10% (if without operational costs), and 5% (if there are operational costs).
Year-end zakat from owned investment assets includes types such as land, houses, buildings, vehicles/transportation equipment (buses, cars, trucks, etc.), production machines, and so forth.
Here’s how to calculate the year-end zakat from investment that must be paid:
Formula:
Investment zakat value = (Profit from asset rental – operational costs) x 5%
Investment zakat value = Profit from asset rental x 10%
Example: Someone rents out their house for 12 million/year. The operational costs incurred to tidy up and repair a leaking roof, repaint, etc., are 2 million. Then, how much zakat must be paid?
Known: Asset rental price = 12,000,000
Operational costs = 2,000,000
Nisab = 520 kg x 13,000 = 6,760,000
Zakat Value = 12,000,000 – 2,000,000 = 10,000,000
= 10,000,000 x 5% = 500,000
So, the amount of zakat that must be paid is IDR 500,000.
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Trade Zakat
Trade zakat is zakat derived from the sale of all kinds of merchandise. This obligation falls under the category of year-end zakat because it must be paid every year after closing the books at the end of the Gregorian or Hijri year, depending on which calendar the trader uses. Year-end zakat from trade has several conditions that must be met. Here are some trade zakat conditions quoted from Contemporary Fiqh Zakat Dompet Dhuafa:
- The owned goods are intended for trade. However, supporting goods that are not sold, such as buildings, computers, cashiers, and other equipment, are not obligatory for zakat.
- Capital, either in the form of money or goods, is merchandise that must be zakat-paid.
- Goods have been stored for 1 year (reached the haul).
- Have reached the nisab, which is equivalent to 85 grams of gold or 595 grams of silver
Calculating Trade Zakat
If you are a trader and have met the above conditions, then you are obliged to pay zakat. Here’s how to calculate trade zakat:
First, make sure the nisab has been met by finding out the current gold price. If it has been met, then here’s the formula we can use to calculate the zakat.
Formula: (Rotated capital + profit + receivables) – (due debts) x 2.5% = Zakat.
Example: A Muslim earned a profit of 60 million from trading clothes. How much zakat if the capital spent is 40 million and has a debt due of 20 million.
Known:
Capital = 40,000,000
Profit = 60,000,000
Receivables = none = 0
Due debts = 20,000,000
Zakat = (Rotated capital + profit + receivables) – (due debts) x 2.5%
Zakat = (40,000,000 + 60,000,000 + 0) – (20,000,000) x 2.5%
= (100,000,000 – 20,000,000) x 2.5%
= 80,000,000 x 2.5% = 20,000,000
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Zakat on Livestock for Trade
What about livestock trade, how much zakat? If the livestock we breed are intended to be merchandise, then the zakat calculation follows the trade zakat calculation. The way to calculate the capital of breeding livestock is by calculating the operational costs incurred during raising and caring for these animals.
Example: A Muslim earned a profit of 100 million from selling cows. The costs incurred during raising and caring for the cows are approximately 60 million for one year. There are no debts and no lending/receivables. How much zakat must be paid?
Nisab = 85 gr x 1,118,000 = 95,030,000 (exceeding the nisab, so obligatory to pay zakat)
Zakat = (60,000,000 x 100,000,000) x 2.5% = 4,000,000
So, the obligatory zakat to be paid is IDR 4,000,000.
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Company Zakat
Company zakat is one type of year-end zakat that must be paid every time accounting books are closed. If the company’s income has reached or exceeded the applicable nisab, then it is obligatory to pay zakat.
The nisab for company zakat varies for each type of business run. For companies in the financial sector, the nisab is equivalent to the price of 85 grams of gold and the zakat rate is 2.5%. Companies in the mining sector have the same nisab and zakat rate as financial sector companies. Companies in the fisheries and plantation sectors have a nisab equivalent to 653 kg of rice and a zakat rate of 5%-10% depending on the irrigation system used.
Quoting from the official Dompet Dhuafa page, Ustad Zul Ashfi stated that for the agricultural and plantation industries, companies need to note that agricultural plants subject to zakat are only two types:
- Grains that are staple foods such as rice, wheat, etc.,
- Fruits which only apply to dates and grapes.
Other than these two types, plants fall into trade zakat because they are intended for buying and selling activities.
Calculating Company Zakat
There are two ways to calculate company zakat. The first is by calculating all the money collected by the company:
(all the money in the company, both cash or in the bank + the value of merchandise sold) x 2.5% = zakat amount.
The second way is to use the company’s assets formula as follows:
(all company assets – non-zakat assets such as facilities and infrastructure) x 2.5% = zakat amount
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Fulfill Year-End Zakat at Dompet Dhuafa
Zakat funds, responsibly managed, can become blessings that bring benefits to the mustahiq. Various Dompet Dhuafa programs always aim to build social, cultural, religious, and educational life to become better and more prosperous. Friends can fulfill year-end zakat through Dompet Dhuafa. Click the image below for more information.
