2 years ago

Calculating Nisab for Zakat nationally

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Zakat is one of the five fundamentals of Islam. It is an obligatory charity for all the Muslims who have the ability to pay and so is an important component of Islamic finance. The ability to pay Zakat is determined on the basis of possessing a certain amount of wealth annually which is known as Nisab. All Muslims who have owned the Nisab amount of wealth is subject to pay Zakat. The word Zakat is derived from Zakd, which means it (a plant) grows. The second and more important meaning is purification. By paying Zakat, Muslims purify their incomes and wealth as they are following the order of Allah.  Zakat is also the right of the poor, needy and the deprived Muslims to whom the  rich and the solvent ones owe. The primary motive of Zakat is religious and spiritual, while the social and economic aspects are also there.

Every year, during the holy month of Ramadan, Muslims across the world give their Zakat and Bangladesh is no exception.  Though there is no religious binding to pay Zakat during Ramadan, the month is considered the time to share and give charity. The Almighty Allah promises more divine blessing for such acts of kindness during Ramadan than in other months.  That's why, Muslims try to pay the larger portion of their due Zakat in this month and subsequently extend their helping hands to the underprivileged section of  society.

As Zakat is based on income and the value of possessions, the common minimum amount is 2.50 per cent or one-fortieth of a Muslim's total savings and wealth in one lunar year. It means, a Muslim has to pay at least 2.50 per cent of the outstanding income, savings and wealth at the end of a lunar year as Zakat, provided he or she owned the required minimum amount of wealth (Nisab). What is critical is to determine the Nisab value of wealth which is the minimum threshold of eligibility of paying Zakat.  If someone has personal wealth below the Nisab amount during a lunar year, he or she is not obliged to pay Zakat.

There are two standards to determine the Nisab value. One is gold standard which sets 85 grams of gold as Nisab and second one is sliver which sets 595 grams of silver. The simple idea is if a Muslim holds at least 85 grams of gold or equivalent quantity of gold-ornament and/or equivalent amount of financial assets at the end of a lunar year, he or she has to pay Zakat. Alternatively, if he or she holds 595 grams of sliver or sliver-ornaments and/or equivalent amount of financial assets, Zakat is obligatory for him or her.

The question is, which standard should one follow to determine and pay Zakat? There are some differences of opinion among the Islamic scholars in this connection. Some argue that it is the gold standard a Muslim has to follow to estimate his or her Nisab for paying Zakat.  Some say that gold standard is applicable only for gold and gold made ornaments and silver standard has to be followed for other financial wealth including silver or silver made ornaments. Again, some suggest that it is the choice of Zakat payer to follow the gold or silver standard.

Those who are in favour of silver standard argue that it is beneficial for the poor and needy as the market price of silver is much less compare to the price of gold. For instance, currently the market price of per gram 22 karat silver (cadmium) is Tk 130, according to Bangladesh Jewellers Association (BJA). So, the price of 595 grams of silver stands at Tk 77,350. If someone considers it as Nisab for paying Zakat on the first day of Ramadan this year, he or she has to pay at least 2.50 per cent of the amount or Tk1933,75 as Zakat. The more he or she owns above the Nisab value, the more the payable amount of Zakat would be.

Proponents of gold standard argue that gold is precious and a valuable metal and its price is comparatively stable. A number of Muslim scholars have also converted the weights and values of silver as specified by Prophet Muhammad (peace be upon him) as Nisab during his time into the proportional gold equivalent for Nisab calculations. Moreover, there is a big difference in Nisba between the gold and silver standards nowadays. The current market price of per gram 22 karat gold (cadmium) is Tk 6610, as set by BJA. Thus the price of 85 grams of gold is Tk 561,850. If it is taken as Nisab value, those who own the equivalent amount of gold and financial wealth are subject to pay at least Tk 14,046.25 as Zakat in the current year.  Against the backdrop, silver as a standard for Nisab seems to compel the low-income and needy people to pay Zakat rather than receiving it. 

Thus, determining Nisab is not an easy task for all and it requires a clear guideline from the Islamic scholars. In this connection, announcing an indicative Nisab nationally may be an option. In Bangladesh, the government announces Sadaqa-al Fitr in Ramadan which is payable before the Salat of Eid-ul-Fitr (especial prayer of Eid day). In a similar vein, the scope of announcing Nisab may be explored with the help of the Islamic scholars. Currently, some of the non-government and private organisations mobilising Zakat provide online Zakat calculators mentioning Nisab on silver standard. This may sometime mislead Zakat payers in various ways. 

In Pakistan, the government annually announces Nisab or minimum amount in bank accounts for Zakat deduction. In the current year, the amount is Rs 88,927 which is around Tk 41,207 in Bangladesh. The announced Nisab in Pakistan is, however, only for savings, profit and loss sharing or similar bank accounts on the first day of Ramadan. And the announced Nisab is in sliver standard. This is not to say that Bangladesh should follow the model, but announce an indicative Nisab annually. Even separate indicative Nisab on gold and silver standards may be announced.

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