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Zakāt (Arabic: زكاة [zæˈkæː], "that which purifies"), is the giving of a fixed portion of one's wealth as a tax, generally to the administration or government and is one of the Five Pillars of Islam.
Early Islamic history
Zakat, a practice initiated by the Islamic prophet Muhammad, has played an important role throughout Islamic history.
The caliph Abū Bakr, believed by Sunni Muslims to be Muhammad's successor, was the first to institute a statutory zakat system. Abu Bakr established the principle that the zakat must be paid to the legitimate representative of the Prophet's authority. Abu Bakr, who ensured that each man, woman, and child had a minimum standard income of 10 dirhams annually, later increased to 20 dirhams.
The second and third caliphs, Umar ibn Al-Khattab and Uthman ibn Affan, continued Abu Bakr's codification of the zakat. Uthman also modified the zakat collection protocol by decreeing that only "apparent" wealth was taxable, which had the effect of limiting zakat to mostly being paid on agricultural land and produce. During the reign of Ali ibn Abu Talib, the issue of zakat was tied to legitimacy of his government. After Ali, his supporters refused to pay the zakat to Muawiyah I, as they did not recognize his legitimacy.
Ultimately, the practice of state-administered zakat was short-lived in the early Islamic history. During the reign of Umar bin Abdul Aziz (717–720 A.D.), it is reported that no one in Medina needed the zakat. After him, zakat came to be considered more of an individual responsibility.
|Taxation in the Ottoman Empire|
Zakat is one of the five pillars of Islam, and is expected to be paid by all practicing Muslims who have the financial means ( nisab). In addition to their zakat obligations, Muslims are encouraged to make voluntary contributions (sadaqat). The zakat is not collected from non-Muslims, although they are sometimes required to pay the jizyah tax.
The amount of Zakat to be paid by an individual depends on the amount of wealth and the type of assets the individual possesses. The Quran does not provide specific guidelines on which types of wealth are taxable under the zakat, nor does it specify percentages to be given. The amount of zakat to be paid on capital assets (e.g. money) is 2.5% (1/40). Zakat is additionally payable on agricultural goods, precious metals, minerals, and livestock at a rate varying between 2.5 (1/40) and 20 percent, depending on the type of goods. Zakat is separate from the practice khums, where Shi'ites are expected to pay one fifth of their income.
Zakat is only payable on assets continuously owned over one lunar year that are in excess of the nisab, a minimum monetary value. The nisab is calculated after adding the cash value of zakatable assets (gold, silver, cash, stocks, merchandise for business, livestock, etc.). Personal assets such as clothing, household furniture, and one residence are not considered zakatable assets. The nisab for gold and other money is the value of 85 grams of gold at world prices. Thus, at 2012 prices, the nisab for such assets was USD $5,200.
Today, in most Muslim countries, zakat is collected through a decentralized and voluntary system where eligible Muslims are expected to pay the zakat based on worship and love of God. Under this voluntary system, zakat committees are established, which are tasked with the collection and distribution of zakat funds. In a handful of Muslim countries including Saudi Arabia and Pakistan, the zakat is obligatory and is collected in a centralized manner by the state. In Jordan, Bahrain, Kuwait, Lebanon, and Bangladesh, the zakat is regulated by the state, but contributions are voluntary.
According to the Quran, there are eight categories of people (asnaf) who qualify to receive zakat funds:
- Those living in absolute poverty (Al-Fuqarā').
- Those restrained because they cannot meet their basic needs (Al-Masākīn).
- The zakat collectors themselves (Al-Āmilīna 'Alaihā).
- Non-Muslims who are sympathetic to Islam or wish to convert to Islam (Al-Mu'allafatu Qulūbuhum).
- People whom one is attempting to free from slavery or bondage. Also includes paying ransom or blood money ( Diyya). (Fir-Riqāb)
- Those who have incurred overwhelming debts while attempting to satisfy their basic needs (Al-Ghārimīn).
- Those working in God's way (Fī Sabīlillāh).
- Children of the street / Travellers (Ibnus-Sabīl).
According to the Hadith, the family of the Muhammad should not consume any Zakat. Zakat should not be given to one's own parents, grandparents, children, grandchildren, or spouses. Also, it is forbidden to disburse zakat funds into investments instead of being directly given to those who are in need.
Some scholars disagree whether the poor who qualify should include Non-Muslims. Some state that Zakat may be paid to non-Muslims, but only after the needs of Muslims have been met.
Fi Sabillillah is the most prominent asnaf in Southeast Asian Muslim societies, where it broadly construed to include funding missionary work, Quranic schools and anything else that serves the community (ummah) in general. It also includes paying salaries to Jihadist fighters, and purchasing arms or other supplies related to the war effort in raising the banner of Islam.
Additionally, the zakat funds may be spent on the administration of a centralized zakat collection system.
Role in society
The zakat is considered by Muslims to be an act of piety through which one expresses concern for the well-being of fellow Muslims, as well as preserving social harmony between the wealthy and the poor. Zakat promotes a more equitable redistribution of wealth and fosters a sense of solidarity amongst members of the Ummah.
Zakat is meant to discourage the hoarding of capital and stimulate investment. Because the individual must pay zakat on the net wealth, wealthy Muslims are compelled to invest in profitable ventures, or otherwise see their wealth slowly erode. Furthermore, means of production such as equipment, factories, and tools are exempt from zakat, which further provides the incentive to invest wealth in productive businesses.