Zakat on Salary — Is It Applicable? A Complete Guide for Salaried Employees

Pakistan has millions of salaried professionals working in government offices, private companies, banks, educational institutions, and other organizations. A question that comes up repeatedly is: "Do I have to pay Zakat on my salary?" The answer is nuanced, and this guide will explain everything in simple terms.

The Short Answer

Zakat is not paid directly on your salary (income). Instead, it is paid on your accumulated savings and wealth. If your total wealth — including savings from your salary, gold, investments, and other assets — exceeds the Nisab threshold and you have held it for one lunar year, Zakat is obligatory.

Think of it this way: your salary is like water flowing through a pipe. Zakat is not on the water flowing through — it is on what accumulates in the reservoir at the end.

Income vs. Wealth: The Critical Distinction

This is perhaps the most important concept to understand.

Income is what you earn. Your monthly salary of PKR 100,000, PKR 200,000, or whatever amount — this is your income. It flows in every month.

Wealth is what you keep. After paying rent, groceries, utilities, school fees, and other expenses, whatever remains in your bank account or in savings — this is your wealth. And Zakat is paid on this wealth, not on the income.

Some modern scholars have proposed the concept of "income Zakat" (paying Zakat on salary income directly), but this is not the mainstream position in classical Islamic jurisprudence. The classical position — followed by the vast majority of Pakistani scholars — is that Zakat applies to accumulated wealth, not to income.

A Pakistani Salaried Employee's Typical Financial Profile

Let us look at a realistic example of a salaried person in Pakistan:

Notice that Ali's Zakat is not calculated on his PKR 200,000 monthly salary. It is calculated on his total accumulated wealth of PKR 1,637,500 after deducting liabilities.

Which Savings Count Toward Zakat?

As a salaried employee, here are the types of savings and assets you should include:

Definitely Include

• Bank accounts: All savings accounts, current accounts, and fixed deposits
• Cash at home: Any cash you keep at home in a safe or drawer
• Gold and silver: All gold and silver in any form (Hanafi position)
• Investments: Stocks, mutual funds, bonds valued at current market price
• Prize bonds: Include the face value of all prize bonds
• Committee savings: Money in ongoing committees (the amount you can access)
• Receivable loans: Money you have lent to others that you expect to get back

Include with Conditions

• Provident fund: Include only the portion you can access (your contribution + employer matching). If the fund is completely locked, some scholars exempt it until it becomes accessible.
• Gratuity: Generally not included until it is received, as it is not in your possession.

Do Not Include

• Primary residence
• Personal vehicle
• Furniture and household goods
• Personal clothing
• Salary that hasn't been paid yet (future income)

The Annual Check Method — Simplest Approach

For salaried individuals, the easiest way to handle Zakat is the "Annual Check" method. Here is how it works:

1. Pick a fixed date each year — Many people choose 1st Ramadan or another memorable date.
2. On that date, calculate ALL your wealth — Cash, bank accounts, gold, silver, investments, etc.
3. Deduct all your debts — Loans, credit card balances, bills due, etc.
4. Compare with Nisab — If your net wealth exceeds Nisab, Zakat is due.
5. Calculate 2.5% — This is your Zakat amount.
6. Pay promptly — Distribute to eligible recipients.

This method is endorsed by the vast majority of scholars and is the most practical for people with regular income.

Bank-Deducted Zakat in Pakistan — Is It Enough?

Under the Zakat and Ushr Ordinance (1980), Pakistani banks automatically deduct Zakat at 2.5% from savings accounts on the 1st of Ramadan each year. But is this enough?

In most cases, no. Here is why:

• The bank only deducts from your savings account balance.
• It does not account for your gold, silver, cash at home, investments, or other assets.
• If you have multiple bank accounts, each bank only knows about its own account.
• Current accounts are often exempt from automatic deduction.

This means you need to do your own comprehensive calculation covering ALL your Zakatable wealth, subtract what the bank already deducted, and pay the remaining balance yourself.

Practical Tips for Salaried Employees

1. Set a Zakat date: Pick one date annually and stick to it. Many people use 1st Ramadan.
2. Keep records: Track all your assets, especially gold and investments.
3. Use a calculator: Our free Zakat calculator makes this easy.
4. Don't forget gold: This is the most commonly overlooked asset among salaried families.
5. Deduct bank Zakat: If your bank deducted Zakat, subtract that from your total obligation.
6. Pay to direct recipients: Where possible, give directly to the poor and needy rather than intermediaries.
7. Consult if unsure: For complex situations (pension funds, stock options, foreign currency), consult a qualified scholar.

Does Monthly Zakat Payment Work?

Some salaried individuals prefer to "spread out" their Zakat by paying a portion each month. Is this valid?

According to most scholars, you can pay Zakat in advance (before its due date), but you cannot delay it after it becomes due. So if you estimate your annual Zakat will be PKR 48,000, you could pay PKR 4,000 per month throughout the year as advance payment. However, on your Zakat date, you should do a final calculation to make sure you have paid the correct total.

What If My Savings Fluctuate?

Many salaried people have savings that go up and down — they save money, then spend it on a big purchase, then start saving again. How does this affect Zakat?

The classical position is:

• If your wealth drops below Nisab at any point during the year, the one-year clock (Hawl) resets.
• If your wealth stays at or above Nisab throughout the year, Zakat is due after one full year.
• Many scholars say that if your wealth briefly dips below Nisab mid-year but recovers, the Hawl does not reset (this is the practical position many Hanafi scholars take).