How to Calculate Zakat on Money

How to Calculate Zakat on Money

How to Calculate Zakat on Savings

Zakat is the compulsory giving of a fixed proportion of one’s wealth to charity. It is considered a type of worship and self-purification. Zakat is one of the five pillars of Islam. Zakat is not a charitable gifts given out of kindness or generosity, but it is the mandatory giving of 2.5% of one’s wealth each year to benefit the poor and the needy that’s everyone must have to know how to calculate Zakat on savings, cash, or money.

Zakat helps a person acknowledge that everything comes from the Almighty and that we do not really own anything ourselves. Zakat is a way to remind us that we cannot take anything with us when we die so we should not cling to our wealth. Zakat also helps to free oneself from the love of possessions and greed.


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The Money Deposited in Bank is of Two Types

Money deposited in Islamic banks: The Zakat has to be paid on the capital money and on the profit. However, it is permissible to set a particular time for the payment of Zakat for each independent money.

If the amount of money decreases and drops below the nisaab during the year, there is no need to pay Zakat and you start calculating the year again. This time when the amount of money reaches the nisaab again you have to pay Zakat.

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You must pay Zakat on the profits of the saved money. Zakat will be paid on the whole amount when one year has passed since the original money was acquired, even if only a few days have passed since the profit was acquired.

However, if your savings money reaches the nisaab amount before one year’s time, you will be paying Zakaah on that money because it comes under the heading of paying Zakaah in advance before one year has passed. 

Money deposited in banks that deal with interest and usury:  Zakat is due on the capital money only, and there is no Zakat on interest. In Islam interest is considered as forbidden and impure money 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.

 How to Calculate Zakat on Savings?

Take your current savings, all cash in hand, any tradable business inventory you have, and the value of any active investments and marketable securities you have and add them together. Let’s assume the amount is 25,000 USD.

Calculate your immediate expenditure such as monthly house rent, other bills, payroll (if you have a business), insurance payments, etc. Let’s assume that adds up to 13,000.

Now deduct your immediate expenditure from your current assets, which will be 25,000 -13,000 = 12,000 USD.

To calculate Zakat now multiply 2.5% with the leftover amount: 2.5% x 12,000 USD = 300 USD is due for Zakat.


Goodness is a vital part of human nature. A man feels inner satisfaction by doing virtuous deeds, like giving money to the poor and helping out a disabled person, an orphan, etc. Such acts of kindness and compassion are the reasons why the human race still exists on the surface of the earth. Hence, Islam greatly emphasizes the importance of doing well to others. 

Islam has made kindness, compulsory upon all those who embrace faith through Zakat. As one of the pillars of Islam, Zakat is a system to redistribute the wealth of Muslims. Zakat is one way to show our gratitude to God, in return for the many boons that we have been blessed with. Zakat helps to shape our lives and helps to develop feelings and a deeper concern for our fellow men. Zakat is a way that brings Muslim society towards prosperity, security, and social justice.

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  1. Imagine for last 12 months(first year) i save Rs 1,000,000 and i pay 2.5% in that year.Next year(Year 2) i save further another 800,000 then must i pay 2.5% of 800,000 or more?

    1. Dear Asif,
      You have to pay 2.5% zakat on your current savings. If you save 10,00,000, then you must pay 2.5% on this amount. Next year, if you save further 800,000 then you have to pay zakat on your total savings that is 18,00,000. We hope this answers your question. Let us know if there is anything else we can help you with.

      1. Small question sir, in First year we had already paid 2.5%x1,000,000=25000, Out of second year savings of 2,5%x 800000 + again of the first year savings of 1000,0000=45000. Then we are paying twice out of 1000,000 which we had already paid? isnt this double tax?

        1. Hi,
          The idea is simple, you calculate total savings+marketable securities at a specific time and pay at least 2.5% on it.
          If for example you had 1,000 in first year, you paid 25. Closing balance 975. Next year you had no extra savings then you have to pay 2.5% on that remaining 975. Its not double but a new year means new zakat on all savings. We must understand the fact that we’re not doing any favour to poor. Everything comes from Allah. Its a mandate by Allah and one of the 5 pillars of islam. If you wish to do any donation over and above is good. Do not ever think that giving will reduce your wealth. As prophet Muhammad sa said if you wish to get more then give more

  2. I sold my property at one place of worth 90 lacs in march and now i want to purchase property at another place, Now ramadan is ahead so now i would have to pay zakat on whole amount???

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