How to Calculate Zakat — A Complete Step-by-Step Guide

Zakat is one of the five pillars of Islam and a mandatory act of worship for every qualifying Muslim. If you own wealth above a certain threshold (called Nisab) for one full lunar year, you are required to pay 2.5% of that wealth as Zakat.

This guide will walk you through the entire process of calculating your Zakat, step by step, with easy-to-understand examples.

Step 1: Understand What Zakat Is

Zakat literally means "purification" in Arabic. It is a form of obligatory charity that purifies your wealth and soul. Allah says in the Quran:

"Take from their wealth a charity that cleanses them and purifies them." — Quran 9:103

Key facts about Zakat:

• It is the third pillar of Islam, after Shahada and Salah
• It is mandatory — not optional like Sadaqah
• The rate is 2.5% of qualifying wealth
• It must be paid once every lunar year (Hawl)
• It has specific categories of recipients defined in the Quran

Step 2: Determine If You Meet the Nisab Threshold

Nisab is the minimum amount of wealth you must possess before Zakat becomes obligatory. There are two standards:

If your total qualifying wealth exceeds the Nisab threshold and you have held it for one full lunar year, Zakat is obligatory on you.

Step 3: List Your Zakatable Assets

Not everything you own is subject to Zakat. Here are the assets that ARE included:

Asset Type	Include in Zakat?
Cash in hand	✅ Yes
Bank savings (checking, savings accounts)	✅ Yes
Gold (all types including jewelry — Hanafi)	✅ Yes
Silver (all types)	✅ Yes
Business inventory (goods for sale)	✅ Yes
Investments (stocks, mutual funds, etc.)	✅ Yes
Loans you have given to others	✅ Yes (if likely to be repaid)
Personal home	❌ No
Personal car	❌ No
Furniture & household items	❌ No
Personal clothing	❌ No

Step 4: Deduct Your Liabilities

You can deduct certain debts and liabilities from your total assets before calculating Zakat:

• Outstanding loans you owe (personal, business, or credit card)
• Rent or bills that are due
• Money owed for goods or services received

Formula: Net Zakatable Wealth = Total Assets − Total Liabilities

Step 5: Calculate 2.5% of Your Net Wealth

If your net wealth is above the Nisab threshold, calculate 2.5% of the total:

Step 6: Pay Your Zakat

Once you know your Zakat amount, distribute it to eligible recipients. The Quran defines 8 categories in Surah At-Tawbah (9:60):

1. Al-Fuqara (The Poor) — Those with little or no income
2. Al-Masakin (The Needy) — Those who cannot meet basic needs
3. Amil Zakat (Zakat Collectors) — Those who administer Zakat
4. Mu'allafat al-Qulub (New Muslims) — Those whose hearts are to be reconciled
5. Ar-Riqab (Freeing Captives) — Helping those in bondage
6. Al-Gharimin (Debtors) — Those burdened by debt
7. Fi Sabilillah (In the Way of Allah) — For causes that serve Islam
8. Ibn as-Sabil (Travelers) — Stranded travelers in need

Use Our Free Calculator

Don't want to do the math manually? Use our free Zakat calculator to get instant, accurate results:

Tips for Paying Zakat

• Keep records — Note down how much you paid and to whom
• Pay locally first — Prioritize the needy in your own community
• Don't delay — Pay as soon as your Zakat becomes due
• Verify recipients — Ensure they qualify under the 8 categories
• Consult a scholar — For complex financial situations, seek guidance