Islamic Finance Law from A-Z

The third out of five pillars of Islam. A religious tax on Muslims having wealth over and above an exemption limit (Nisab) at a rate fixed by the Sharia. As such, it is not a tax on income, but on the assets held by a Muslim at a prescribed date (a Zakat day has to be determined for calculation of Zakat money to be paid annually) over and above the amount of Nisab after fulfillment of the normal needs of the owner. The objective is to take away a part of the wealth of the well-to-do and to distribute it among the poor and the needy. It is levied on cash, cattle, agricultural produce, minerals, capital invested in industry and business, etc. The rates are different for different natures of assets. The recipients of Zakah funds have been identified in the Holy Quran: they are the poor, the needy, Zakah collectors, new converts to Islam, travellers in difficulty, captives and debtors and for the cause of the Almighty.