FAQs

Frequently Asked Questions

Can I get a tax rebate for my Zakat?

Yes all donors to the New Zealand Zakat Foundation will be eligible to receive a 33% rebate.

If you pay your Zakat through Givealittle a receipt will be generated automatically. If you pay by direct deposit please send us an email with your name and contact details so we can issue you a receipt.

Is it permissible to apply for a tax refund for zakat paid?

Yes.

When a tax refund is given it is considered a rebate of income tax you have paid on your income and does not impact the donor or donee of the charitable payment. In the case of zakat this means that the zakatable amount is not affected and therefore there is no jurisprudential preventative consideration for receiving a tax refund.

The policy rationale for tax deductible charitable donations is recognition of the contribution that charities make to the wellbeing of New Zealanders. Before a charity is granted charitable status this charitable purpose is first verified by the Charities Commission. This is also why there are different tax refund criteria for donations to registered charities whose beneficiaries are abroad.

Lote Tree Trust, the parent organisation of the New Zealand Zakat Foundation is a registered charity and is established for the benefit of New Zealanders.

Who has to pay Zakat?

Anyone who possesses a zakatable-minimum (nisab) or more in any form of wealth, such as cash, gold, silver, business stock, etc – or after combining any of them must pay Zakat if he possesses it for a lunar year. As soon as one possesses this amount, one’s Zakat year will start, and one will be obligated to actually pay Zakat once a whole year has passed if one still possesses an amount equal to or greater than the zakatable-minimum at the end of the year. 

Fluctuations during the year are of no consequence unless one’s wealth diminishes to the point where one only has enough for his living expenses, in which case the year is nullified, and one starts again the next time he owns the value of nisab over and above his living expenses.

What is the Zakatable minimum (Nisab) and how is it calculated?

The value of nisab is the measure by which one decides if one pays Zakat or not. This is equivalent to the monetary value of 87.48 grams (6.61 ounces) of gold. If one posses this amount of zakatable wealth, above and beyond one’s upcoming debts and immediate expenses, then Zakat is due.

How much of my Zakat is used for administration?

0 % of Zakat funds will be used for administrative costs related to the distribution of Zakat. 

You can be assured 100% of your Zakat will reach eligible recipients.

All administration costs of the Foundation will be sponsored by Lote Tree Trust. To find out more about Lote Tree please visit lotetree.nz

How do I calculate my Zakat?

The basic understanding is that a person adds all assets together (cash, gold, silver, etc.) and then deducts all liabilities (immediately payable debts, living costs, bills, expenses etc.) from this amount. If the final figure is equal to or greater than the nisab, then 2.5% of it is due in zakat.

It is, of course, permitted, and praiseworthy not to deduct all liabilities, as it maximises one’s Zakat – and results in greater benefit to the poor and greater reward for the giver.

How much is Zakat?

The zakatable amount is counted from zakatable wealth and trade goods while excluding personal possessions (house, furniture, clothing, vehicles, etc.), upcoming debts, and immediate expenses. 

So if one, for instance, has $1000 more than the nisab but is in debt for $1500, one does not have to pay zakat.

Do I Need to Pay Zakat on My KiwiSaver?

Yes.

It is also permissible to calculate and keep accurate records of the Zakat owing for your Kiwisaver each year and pay it all once you have access to your Kiwisaver fund.

It is preferable to pay it annually when due.

What if my jewellery is made up of different materials (other than gold and silver)?

Zakat is not required on jewelry that is made of materials other than gold and silver, unless it was purchased with the intention of resale.

What is the technical definition of Zakat?

“Transferring ownership of an amount of material wealth specified by the Lawgiver to a poor Muslim who is not Hashimi nor their client, without material benefit returning to the giver in any way, for the sake of Allah Most High.” [Tumurtashi, Tanwir al-Absar]

There are many important points understood in this definition:

  1. It is a condition that there be a transferring of ownership. (Simply put: your Zakat has to be given). As such, it is not valid to forgive a debt someone owes you as zakat.
  2. Zakat has to be given to the poor and needy. It is not valid to give Zakat for projects, mosques, and virtuous activity, unless the Zakat itself will be given to the poor and needy.
  3. Zakat must be given to a Muslim. Unlike charity, it is not valid to give Zakat to a non-Muslim.
  4. Zakat cannot normally be given to Hashimis (those from the family of the Prophet, Allah bless him and give him peace).
  5. The giver cannot materially benefit from giving zakat. As such, one cannot give Zakat to one’s parents, children, or spouse, because benefits between these people are shared.
What is the difference between Zakat and Sadaqa?

Zakat is obligatory on anyone who meets the conditions and is payable once a year. Sadaqa is optional and can be paid at anytime.

Zakat is valued at 2.5% of your savings over a year, and must be paid to specific categories of individuals. Sadaqa can consist of any amount and can be given to organizations or mosques.

Who receives Zakat?

Eligible recipients include: the poor, the indigent (who possess less than the nisab), those with overwhelming debt, and travellers cut off from their wealth at home.

One of the conditions of Zakat is that it entails a transfer of ownership to an individual; as such, we cannot use our Zakat to pay for the construction or support of Islamic institutions. Rather, this money goes specifically to the individuals listed above.

How do I determine my Zakat Anniversary?

Your Zakat anniversary is tied to a person’s owning the minimum balance (the nisab value). A person starts calculating the anniversary once they have gained this minimum balance, and must hold it for a year. Fluctuations during the middle of the year are of no consequence, unless one’s zakatable amount reaches zero. Only the beginning and end of the year are taken into account. One has to possess a zakatable-minimal both at the beginning and at the end of one’s Zakat year in order for Zakat to become obligatory.

Can I pay Zakat in instalment’s?

Yes, as long as: 

  1. There is no undue delay, which is defined as more than one year, in paying the complete amount one owes in Zakat after it becomes obligatory, and
  2. One intends, whether actually or effectively, paying Zakat upon disbursing each installment. [Ibn `Abidin, Radd al-Muhtar]

What do I do if I haven’t paid Zakat for previous years?

You owe Zakat one year after you first came into possession of more than the nisab amount (see e-nisab.com for historical values). If you do not know for sure when this happened, you should try to establish this date based on your best estimation. Perhaps looking into your bank records will help.

For example, if you accumulated your nisab after you started working, then think about how much you made per paycheck, and how much of that you normally spent versus how much you kept, and then calculate from that when you surpassed the nisab. Your first due-date for zakat, then, would be one lunar year from that date.

For the second year you would also deduct the amount owed as Zakat for the first year seeing as this is a debt owed to Allah

Do I need to pay Zakat on gold and silver jewellery that I use?

In the Hanafi school, Zakat is due on all gold and silver. In the Shafiʿi school, one can deduct jewellery that is worn from one’s Zakat calculations.

Examples & Case Studies

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Can you give me an example?

The following is an example, and assumes a person has all types of assets. Someone who doesn’t have one category of assets, simply leaves it out when filling the form.

When calculating Zakat one first takes the value of the gold one possesses. Then one adds the value of silver, and all the cash he has.

If one has shares purchased for resale, one adds their (sales) value too. If one bought them without the intention of selling them on, but to benefit from their dividends, one adds the value of the dividends at that moment.

Then one adds the value of any rent from rental properties. Then one adds the value of any money lent to other people.

If one has a pension scheme one adds the value of the pension. (This is like a saving, and technically the Zakat has to be paid when one collects the money, but to avoid confusion and complications it is advisable to pay it every year one is over the nisab).

From this total figure, one subtracts one’s upcoming month’s expenses (rent, fuel, food, etc). One also subtracts the value of any immediate debts owed to others. (This is a debt which one needs to repay pay within a year.) It is, of course, permitted (and praiseworthy) not to deduct this, as it maximizes one’s Zakat – and results in greater benefit to the poor and greater reward for the giver.

If one has a long term debt like a mortgage, one can subtract the amount of the upcoming installment – but not any interest owed.

After all this, if the figure one is left with is equal to or greater than the current market value of 87.48 grams (6.61 ounces) of gold, one then pays 2.5% as zakat.

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Some Case Studies

Case Study #1

The zakatable-minimum is $2000. One possess $1000 of cash, $1500 of gold and silver, and $2500 in trade goods then one’s total zakatable assets amount to $5000 (supposing one has no money lent out, or stocks). However, one also has a debt of $500 and immediate monthly expense amounts to $500 also, which will be subtracted. Thus, the total zakatable wealth is $4000. This is above the zakatable-minimum, so the obligation to pay Zakat will commence.

If one possessed this amount on the 1st of Rabi‘ al-Awwal then this is when the Zakat year starts. If then, for example, one possesses $2500 on the 1nd of Rabi‘ al-Awwal of the next year, one will have to pay 2.5% of $2500. Thus, what is taken into consideration is the amount one possesses above the zakatable-minimum at the end of one’s Zakat year. This is the amount Zakat is due upon.

Fluctuations during the middle of the year are of no consequence, unless one’s zakatable amount reaches zero. Only the beginning and end of the year are taken into account. One therefore has to possess a zakatable-minimal both at the beginning and at the end of one’s Zakat year.

Case Study #2

The zakatable-minimum is $2000. One’s zakatable assets amount to $3000. However, one also has $500 of immediate expenses and a debt amounting to $2000. Thus, the total zakatable wealth is $500. This does not reach the zakatable-minimum and so no Zakat is due upon one. In such a case, one’s Zakat year does not even commence because one never possessed a zakatable-minimum to begin with

Case Study #3

The zakatable-minimum is $2000. One’s zakatable assets amount to $4000. One has immediate expenses of $500 and a debt amounting to $1000. Thus, one subtracts this, and is left with a total zakatable wealth of $2500. One possesses this amount on the 1st of Muharram. Since it is over the zakatable-minimum, the Zakat year starts on this date. On the 1st of Muharram the following year the total zakatable wealth, having decreased, amounts to $1500. Since this is not equal to or more than the zakatable-minimum no Zakat will be due.