01The Four Steps
Total Your Assets
Add up all zakatable assets on your Zakat date: cash (all accounts, all currencies), gold, silver, investments (stocks, funds, bonds, ISAs), business inventory (finished goods, work in progress, raw materials), rental income saved, receivables (money owed to you), pension fund value (if accessible), and property held for resale. Use current market values on the day you calculate, not purchase prices.
Deduct Eligible Debts
Subtract liabilities that are due. The rules differ by school (see debt section below). Generally: immediate personal debts, 12 months of installment payments (mortgage, loans), outstanding rent and utility bills, salaries owed to staff, unpaid dowry, and outstanding basic living expenses.
Check Against Nisab
Compare your net zakatable wealth against the current Nisab threshold. If your net wealth is at or above the Nisab, proceed to step 4. If below, no Zakat is due this year.
Multiply by 2.5%
Your Zakat due = Net Zakatable Wealth × 0.025. This is the amount you must pay to eligible recipients.
02Debt Deduction Rules by School
| School | Jewellery | Debt Deduction |
|---|---|---|
| Hanafi | Includes all gold/silver jewellery | Deducts 12 months of installment debt |
| Maliki | Exempts worn jewellery | Deducts 12 months of installment debt |
| Shafi'i | Exempts worn jewellery | No debt deduction |
| Hanbali | Exempts worn jewellery | Deducts 12 months of installment debt |
The Four-Tier Debt Classification (Hanafi)
The Hanafi school classifies debts owed to you into four categories, each treated differently for Zakat purposes:
Strong Debts
Personal loans you gave to others, trade debtors. Include in your zakatable assets even before received.
Medial Debts
Debts from selling personal items. Only add to zakatable assets 12 months after receipt.
Weak Debts
Wages, unpaid dowry, pensions, assets in trust. Only add after received.
Bad Debts
Debts you realistically have no hope of recovering. Do not include in zakatable assets.
Types of Debts You Owe
Immediate debts (Mu'ajjal): Debts due right now (e.g. a personal loan from a friend that is now due). Wholly deductible.
Installment debts (Muajjal): Debts paid in installments like mortgage payments, student loans, or car finance. Only 12 months of payments are deductible, not the full outstanding balance.
Shariah home purchase schemes: Murabaha schemes allow 12 months of installments to be deducted. Ijarah and Diminishing Musharakah schemes do not allow any deduction, since these are technically rent/partnership, not debt.
Commercial loans: Only the portion of the loan that financed zakatable assets can be deducted, not the entire loan.
03Worked Examples
Basic Example: Cash Only
Cash in bank: $20,000
Cash in hand: $500
Debts owed: $2,000 (credit card)
Net zakatable wealth: $20,000 + $500 - $2,000 =
$18,500
Nisab check: $18,500 > $14,121 (gold Nisab) ✓
Zakat due: $18,500 × 2.5% = $462.50
Intermediate Example: Cash + Gold + Investments
Cash savings: $15,000
Gold jewellery (resale value): $3,000
Investment portfolio: $7,000
Total assets: $25,000
Mortgage (12 months): $12,000
Outstanding bills: $500
Credit card: $1,500
Total liabilities: $14,000
Net zakatable wealth: $25,000 - $14,000 = $11,000
Nisab check (using silver Nisab ~$1,665): $11,000 > $1,665 ✓
Zakat due: $11,000 × 2.5% = $275
Advanced Example: Business Owner
Cash: $30,000
Gold: $5,000
Trade inventory (market value): $40,000
Raw materials: $8,000
Trade debtors (strong debt): $15,000
Investment shares (zakatable portion): $6,000
Total assets: $104,000
Supplier invoices due: $20,000
Staff salaries outstanding: $5,000
Mortgage (12 months): $18,000
Commercial loan (zakatable portion): $10,000
Total liabilities: $53,000
Net zakatable wealth: $104,000 - $53,000 = $51,000
Zakat due: $51,000 × 2.5% = $1,275
04Valuation Rules
Use current market value, not purchase price. For gold jewellery specifically, use the resale value of old gold (what you would get if you sold it today at a gold shop), not the retail price you paid.
Gold-plated items are not zakatable if the gold content is less than 50% of the total metal weight.
Diamonds and precious stones are NOT zakatable. There is scholarly consensus (ijma) on this. However, if they are held for trading purposes and reach the Nisab, then Zakat applies to their trade value.
05Self-Assessment Checklist
Assets to Include
Gold and silver (all forms) · Cash at bank · Cash in hand · Savings accounts · Investment bonds · ISAs · National savings · Other liquid investments · Property for resale · Rental income saved · Finished goods · Work in progress · Raw materials · Shares for resale · Shares held as investment (zakatable portion) · Strong debts owed to you · Trade debtors · Pension fund value (if accessible) · Bare trust assets
Liabilities to Deduct
Personal loans owed to others · Outstanding mortgage payments (12 months) · Rent and bills outstanding · Goods purchased on credit · Salaries due to staff · Unpaid dowry · Commercial loans (zakatable portion only) · Muajjal debts (12 months of future installments) · Outstanding basic living expenses · Bad debts (deduct from receivables)
Haraam income is not subject to Zakat. The entire value of haraam income must be disposed of as charity (not counted as Zakat). Purify the wealth first, then calculate Zakat on the remainder.
Ready to calculate? Use our
Zakat Calculator
which handles all of this automatically based on your school.
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Who Receives Zakat?