The Definition Of ‘Zakat’
Zakat is a term used in Islamic Finance to refer to the obligation that people have to sacrifice every year a certain percentage of wealth to charity. Zakat is obligatory for Muslims to physically and spiritually cleanse their annual earnings that are in excess of what is necessary to ensure the basic needs of a person or family.
Breaking Down The ‘Zakat’
There are more detailed descriptions in religious texts describing minimum amounts of zakat in respect of agricultural products, breeding, business activities, paper currency and precious metals such as gold and silver.
The most common level of zakat on income from cash, securities and gold is 2.5% of the total cost.
As one of the five pillars of Islam, zakat is a religious obligation for all Muslims who meet the required criteria of wealth. It is not a charitable contribution and is tax or obligatory alms. The payment and disputes on zakat have played a major role in Islamic history, particularly during wars Ridd.