How to Calculate Zakat on Reserve

How to Calculate Zakat on Reserve

How to Calculate Zakat on Reserve

Islam is a religion that promotes love and peace. It encourages human beings to live in peace and harmony in the world. Islam emphasizes giving Zakat to fulfill its motto of making the world a better place. Zakat is given to help the poor and needy from your reserve, so it is very important to know how to calculate zakat on reserve. It is mandatory for every adult Muslim of sound mind and means to give Zakat.

Allah Almighty has mentioned in Quran: “Take from their wealth so that you might purify and sanctify them.” (Quran 9:103). Zakat is so important that its order has been given everywhere in the Quran where the order of offering Salat or Namaz has been passed. By giving Zakat, a Muslim accepts that everything we have is given by Allah and we do not really own it. It is an act to help learn sincerity and honesty.

Zakat is applicable on reserves which means properties or goods that are retained for future use and not needed immediately. For example, a house in which you are living, the car you drive or the land you use for farming Zakat on these are not applicable. Zakat is mandatory on reserves like cash in hand or in bank accounts, shares, pensions, land retained for sale, gold, silver, etc. Therefore you should have complete knowledge of how to calculate zakat on reserve that you have. 

The Money Deposited in the Banks:

Zakat can be divided into two parts for money saved or deposited in the banks:

1)Savings in Islamic banks: The Zakat has to be paid on capital money and on profit. So when a whole lunar year passes by on the capital money which reaches the minimum amount liable for Zakat itself, then the Zakat has to be paid on all the money, the capital, and the profit. However, it is allowed for you to set a particular time for the payment of Zakat for each independent money.

-> How to Calculate Zakat on Profit

How to Calculate Zakat on profit

2) Savings in banks which deal with interest and usury: The Zakat is due on the capital money only, and there is no Zakat on interest because Zakat is prohibited on impure money or interest which is not the property of its owner. It is an obligation to get rid of this money by giving it to the poor and the like, and it is not permissible to deduct this money from the due Zakat.

Notice that this kind of saving money with interest is not allowed even if one gets rid of the profit obtained. On Land:

Land bought for resale within a reasonably short period of time is treated like other commercial goods. It is liable to Zakah on the basis of its current value on the owner’s Zakah date. This means that if you expect to sell the land within a few months or a year, then on your Zakah date you should calculate its value and pay zakah for the full value at the rate of 2.5%, just like a businessman paying for his stock.

On Cars and Houses:

There is no Zakat on personal properties but if you have a car for rent, you have to give Zakat from its earnings, not from the value of the property. If you are a dealer of real estate property, houses you own will be your commodity and you give Zakat on their total value. If you build a residential complex, selling some units and renting others, then the money you receive for the parts you sell is liable to Zakah at the rate of 2.5% on the day you receive the money.  

How to Calculate Zakat:

If your personal wealth and the reserves you own, are  more than the nisab amount; you must give Zakat and you must know how to calculate zakat on reserve. Nisab is the cut-off amount. If your personal wealth is below the nisab amount you are subjected to Zakat. It is advised to use either the current market price of gold or silver to calculate nisab because of prices of these materials tend to fluctuate. Just choose the rate of any of these of two. The nisab is the cash equivalent of 3 ounces/87.48 grams of gold or 21 ounces/612.36 grams of silver.


The objective of  Zakat is to help society by sharing the bounties and boons of Allah bestowed upon us and give a chance to the unfortunate ones to live a better life. In order to understand the importance of the concept of Zakat, just take a look at millions of people suffering in different parts of the world through poverty and conflict. There is a humanitarian crisis going on in different parts of the world which has no end in sight. In many countries, people are exposed to frequent natural disasters. Take a look at the homeless people who are increasing in number every day.

Zakat is meant to be used specifically for the betterment of people in need, in disasters, crises, and suffering. With Zakat money basic life provisions like food, water, clothing, medicine, and shelter can be provided to them or for their families. Zakat can also be given to Relief Aid agencies so that they can use them to provide aid to these people.

Besides helping the society, Zakat is also beneficial for the giver. Almighty Allah removes the sins of those who give Zakat as the Prophet (SAW) said: “Giving charity wipes away sins just as water extinguishes the fire.” It helps Muslims to follow the path of modesty. It leads to the purification of the heart and helps to demolish ego or pride. It helps to eliminate poverty in society. It stops one from being a miser. It is proof of the faith that the giver has in Almighty Allah. Therefore, every Muslim must gain knowledge about Zakat and ensure that it is for the betterment of deserving people.

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