Zakat on Salary — Is It Applicable?

One of the most common questions Pakistani Muslims ask is: "Do I have to pay Zakat on my salary?" The short answer is: not directly on your salary itself, but on the savings from your salary.

Let's explore this in detail.

Understanding the Difference: Income vs. Wealth

Zakat is levied on accumulated wealth, not on income. There is a crucial difference:

Salary = Income you earn each month
Savings = Wealth that remains after your expenses

Zakat is paid on your savings and accumulated wealth — not on your gross or net salary. When you receive your salary and spend it on living expenses, Zakat does not apply to the spent portion. Only the portion that remains as savings for one full lunar year is Zakatable.

When Does Zakat Apply to Salaried People?

As a salaried individual, Zakat becomes obligatory when:

Your total accumulated wealth (savings + assets) exceeds the Nisab threshold
You have held this wealth for one full lunar year (Hawl)
The wealth is yours to use freely (not locked in non-accessible retirement funds, etc.)

What Counts as Savings for Zakat?

Type of Savings	Zakatable?
Money in bank accounts	✅ Yes
Cash kept at home	✅ Yes
Gold & silver	✅ Yes
Business investments	✅ Yes
Stocks & mutual funds	✅ Yes
Prize bonds	✅ Yes (face value)
Provident Fund (accessible portion)	✅ Yes
Locked pension funds (not accessible)	❌ No (until accessible)
Personal home & car	❌ No

Example: Zakat Calculation for a Salaried Person

Scenario

Ahmed earns PKR 150,000 per month. After expenses, he saves approximately PKR 40,000 per month. After one year, his situation is:

Bank savings: PKR 480,000
Cash at home: PKR 30,000
Gold (wife's jewelry): PKR 500,000
Prize bonds: PKR 100,000
Car loan remaining: PKR 200,000

Total Assets: PKR 1,110,000

Less Debts: PKR 200,000

Net Wealth: PKR 910,000

Nisab (Hanafi): PKR 153,090 — ✅ Above Nisab

Zakat = PKR 910,000 × 2.5% = PKR 22,750

The "Flowing Wealth" vs. "Annual Check" Methods

There are two approaches salaried people commonly use:

Method 1: Annual Check (Recommended)

Pick one date each lunar year (many choose 1st Ramadan). On that date, calculate ALL your wealth, deduct debts, and if above Nisab, pay 2.5%. This is the simplest and most commonly recommended method.

Method 2: Individual Tracking

Track when each deposit reached one year in your possession. This is technically more precise but extremely difficult to manage for salaried individuals receiving monthly income.

Our recommendation: Use Method 1 (Annual Check). Most scholars consider it perfectly valid and it's much easier to implement.

Does Zakat Apply to Salary Advances or Bonuses?

Salary advances: No — this is money you haven't earned yet. It's essentially a loan from your employer.

Bonuses: Yes — once received, it becomes part of your wealth. If it's still in your possession on your Zakat date and your total wealth is above Nisab, it is Zakatable.

What About Company-Deducted Zakat in Pakistan?

In Pakistan, banks automatically deduct Zakat on savings accounts on 1st Ramadan (under the Zakat and Ushr Ordinance, 1980). However:

This only covers bank savings — not gold, cash at home, investments, etc.
You may still owe additional Zakat on your total qualifying wealth
If you file a CZ-50 exemption form (for Shia Muslims or others), no bank deduction occurs and you must pay Zakat independently

Calculate Your Zakat on Savings →