There is always an increase in donations with the commencement of the holy month of Ramadan. A major contributor to these increased donations is Zakat. One can pay the Zakat money at any time during the year. However, to double the rewards, Muslims usually pay the Zakat money in the holy month of Ramadan. By the grace of Allah (SWT), we are going to be graced with Ramadan’s blessings once more. If you have not calculated the annual 2.5 percent yet, because it is your first time, well now will be the ideal time to do so. In today’s discussion, we are focused on how to calculate Zakat on the property that you have. The discussion demands your utmost attention, so stick until the very end, for a better understanding!
Importance of Zakat
Before we get into the main debate, it is important to realize the importance of Zakat in Islam. Zakat is one of the fundamental pillars of Islam. There is no better way of purification of soul and wealth than Zakat. Zakat gives the underprivileged section of society their right, which they have on our wealth. In the holy Quran, Allah (SWT) says:
“Those in whose wealth there is a recognized right for the needy and the poor”
How do you calculate Zakat? You must know that Zakat becomes obligatory for you, only if you meet the Nisab threshold. Nisab is the minimum amount of wealth any Muslim must possess, be eligible for paying Zakat. The Nisab is the value of 87.48 grams of gold or 612.36 grams of silver. The prices change every year, so you had better keep those in check.
To calculate the exact amount of Zakat that you need to pay, all of your assets have to be taken into consideration. You can calculate the exact amount of Zakat using this tool.
Property on which Zakat is not applicable
Now, first, let us have a look at the property on which you do not have to pay Zakat. Muslims do not have to pay Zakat on the property that they buy for their personal use. These properties include:
1- Residential properties
2- Farming Properties
3- Business properties
Muslims can use any of these properties in any manner and these will still be exempted from Zakat. However, one thing must be kept in mind in this regard. If these properties generate any kind of revenue, and the revenue is generated for one year until it hits the amount that is necessary to have to pay zakat, in that case, zakat will be applicable on this revenue. You need to read this twice to absorb the meaning of this statement!
Zakat applicable property – Calculate Zakat on Property
Now let us focus on the properties, on possession of which, one must pay Zakat. These include the properties that are not in the use of the owner. For a better understanding, we can divide these properties into two categories.
Because Rental properties are not in the use of the owner, one must pay Zakat on the property of this nature. The revenue that one generates in form of rent from these rental properties has Zakat applicable to it. We know that Zakat is 2.5 percent of annual savings. Now, let us explain the zakat on property rent by a simple example. Imagine that you earned 1 million PKR from rent on the properties in your possession. The Zakat, in this case, is 25,000 rupees, which is exactly 2.5 percent of the overall rent.
Property bought for selling in future
Sometimes, one buys land with the intent to sell it in the future. Now, the price at which this land is sold is also Zakat-able, if you will have it that way! Once again, the percentage remains the same. If you are selling land for a hypothetical price of 10 million rupees, then the 2.5 percent must be paid in Zakat. Zakat on the property, in this case, will be 250,000 PKR.
Conclusion – How to Calculate Zakat on Property
Well, that is all from this discussion. Zakat is one of the major ways through which Muslims support their fellow Muslims financially. The Zakat money not only helps the poor but is also a source of purification of any assets you have. For reaping all the benefits of giving Zakat, one must pay utmost attention to the calculations. We hope that this article helped you in calculating Zakat on the property properly.