Islamic Accounting Practices
Chapter 13: Zakat
Definition of ZAKAH
Literary, Zakah means blessing, purification, increase and
cultivation of good deeds. It is called Zakah because it blesses
the wealth from which it is paid and protects it. In Shari'ah,
Zakah is an obligation in respect of funds paid for a specified
type of purpose and for specified categories. It is a specified
amount prescribed by Allah the Almighty for those who are
entitled to Zakah as specified in the Qur’an. The word Zakah is
also used to indicate the amount paid from the funds that are
subject to Zakah.
ZAKAH vs. SADAQA
Zakah is not religious charity, which is termed
Sadaqah (although Sadaqah is sometime used in the
Qur’an to mean Zakah). Charity is a voluntary affair,
whereas Zakah is a compulsory levy on wealth and
income, once it exceeds a certain amount termed
nisab. According the Qur’an it is a right of the poor
on the wealth and income of the rich.
Some Qur'anic Zakah verses
And in their wealth and possessions (was remembered) the right of the (needy,)
him who asked, and him who (for some reason) was prevented (from asking).
Adh-dhariyat 51:19
Of their goods, take alms, that so thou mightest purify and sanctify them; and pray on their
behalf. Verily thy prayers are a source of security for them: And Allah is One Who heareth and
knoweth At-Tauba (The Repentance) (9:103)
Cash and cash equivalent
Cash and cash equivalent include local and foreign
currency and deposits with the central bank and other
Institutions which the Islamic bank can withdraw in full
on demand.
For Zakah purposes cash and cash equivalent includes, in
addition to the above, gold or silver in the form of
currencies, bullion or other.
FIQH OF ZAKAH
AGRICULTUR GOLD, CASH
E
SOURCES
OF
ZAKAH
LIVESTOCK
INVENTORY
Sources for ZAKAH
Zakah is levied on gold and silver (or money, bank
account balances, financial papers) , livestock (cattle,
sheep/goats, camels), agricultural produce of staple
crops (wheat, rice), business working capital
(inventory, receivables, cash and cash equivalents),
Under each sources, there are further detailed fiqh
rules which vary among the schools of thought.
ZAKAH in Today’s Economy
FAS no. 9 and the AAOIFI shari'ah standard (11) on Zakah,
Sheikh Yusuf Qaradhawi’s seminal work and the FatÉwÉ of the
Islamic Fiqh Academy of the OIC are all making the rules of
Zakah more relevant to today’s economy.
Islamic financial institutions are businesses and therefore have to
pay business zakÉh.
Liability Conditions to Zakah
Unencumbered possession
The asset must be capable of growing or increasing
Nisab ( i.e. 85 grams of gold or 595 grams )
H’awl and Zakah rates [2.5% (per Lunar year) and 2.5775% per Solar year)]
Exception: except in the case of agriculture where the Zakah is payable on the day of
harvest at 5 or 10%.
Duplication of Zakah, TAX, Unlawful fund
Determination of the Zakah base
Net Assets method (Prescribed by Fuqaha)
Net invested funds method (used by government organizations).
METHODS OF
DETERMING
ZAKAH BASE
NET NET
INVESTE
ASSETS
D FUNDS
METHOD METHOD
Question 13.3
Zakat Payable by Bank Shariah Malaysia Berhad
NET ASSETS METHOD
Current Assets RM
Cash and balances with Banks and agents 150,500,000
Deposits and placement with financial institutions 1,800,000,000
Dealing securities 1,200,500,000
Investment securities 300,000,000
Financing of customers Click to add text 4,500,000,000
Bills receivable (less 200k) 250,300,000
Total Current Assets 8,201,300,000
Less: Current Liabilities
Deposit from customers 7,000,500,000
Deposit and placement of banks and other financial institution 40,500,000
Bill payable (less 300k) 84,700,000
Total Current Liabilities 7,125,700,000
Zakatable Amount (TCA - TCL) 1,075,600,000
Zakat due at 2.5775%' 27,723,590
NET INVESTED FUND METHOD
Share capital 500,000,000
Reserves 1,226,500,000
Bill payable 300,000
1,726,800,000
Less: deposit with BNM (250,500,000)
1,476,300,000
Less:
Fixed assets (400,500,000)
Bill reeceiable (200,000)
Zakatable Amount 1,075,600,000
Zakat due at 2.5775%' 27,723,590
Question 13.5
Zakat Payable by Bank Shariah Malaysia Berhad
NET ASSETS METHOD
2004 2005
Current Assets RM RM
Cash and short term funds 1,410,000 2,308,000
Deposits and placement with financial institutions 79,000 21,000
Dealing securities (1721-21+22.5) 1,722,500 2,369,000
Investment securities (1429-19+23) 1,433,000 1,448,000
Other assets 7,800,000 6,950,000
Bills receivable (12000 - 5%) 11,400 8,550
Total Current Assets 12,455,900 13,104,550
Less: Current Liabilities
Deposit from customers 6,500,000 6,185,000
Deposit and placement of banks and other financial institution 350,000 32,000
Bill payable 80,000 74,000
Other payables 81,000 83,000
Other liability - deferred tax 7,000 8,000
Total Current Liabilities 7,018,000 6,382,000
Zakatable Amount (TCA - TCL) 5,437,900 6,722,550
Zakat due at 2.5775%' 140,162 173,274
NET INVESTED FUND METHOD
Share capital 500,000 500,000
Reserves 663,000 613,000
Equity (less 15) 4,753,000 6,165,000
5,916,000 7,278,000
Less: deposit with BNM (373,000) (390,000)
5,543,000 6,888,000
Less:
Fixed assets (90,000) (115,000)
Zakatable Amount 5,453,000 6,773,000
Zakat due at 2.5775%' 140,551 174,574
Different (389) (1,300)
The different is small and immaterial
Thank you