Gold Zakat Calculation: A Comprehensive Practical Guide for Muslims

Zakat is a fundamental Islamic obligation and one of the five pillars of Islam. It is a means of purifying wealth and promoting social solidarity among community members. The scope of Zakat includes gold, silver, cash, crops, and other zakatable assets. However, the Zakat on gold holds particular importance in modern times, as gold is considered a safe haven against inflation and economic crises. Therefore, many ask: What is the Nisab of gold? How is it calculated? And what are the conditions for its obligatory payment?

Who is obliged to pay Zakat on gold?

Zakat on gold is obligatory for every adult, sane Muslim who owns gold under certain conditions. First, the owner must have reached the specified Nisab threshold, and second, a full lunar year must have passed since acquiring it. Third, the wealth must be fully owned free of debt. Fourth, the gold must not be stolen or acquired through unlawful means. If all these conditions are met, the Muslim becomes obliged to pay Zakat without delay.

There is no difference in this obligation between gold saved for investment and gold for personal adornment, according to the majority of contemporary scholars. Zakat also applies to all forms of gold, whether bars, coins, jewelry, or gold investments in the stock market.

What is the Nisab of gold?

The legal Nisab is the minimum amount of wealth that, if owned by a Muslim and a full lunar year passes over it, Zakat becomes obligatory. Scholars have set the Nisab based on authentic hadiths from the Prophet صلى الله عليه وسلم.

The basic Nisab equals 85 grams of pure gold (24 karat).

Based on this standard, the Nisab varies according to the purity of gold:

The weight differences are due to lower-karat gold containing other metals mixed in, thus requiring a larger weight to reach the same amount of pure gold.

How to calculate Zakat on gold: Practical steps

The calculation process is straightforward, following a simple mathematical formula:

Zakat on gold = 2.5% × current market value of the gold

Step 1: Determine the pure gold amount

If you own gold of mixed karat (such as 21 or 18), you need to calculate the pure gold content:

Pure gold = total weight × purity percentage

Example: If you have 100 grams of 21-karat gold (purity 87.5%)

• Pure gold = 100 × 0.875 = 87.5 grams

Step 2: Check if the Nisab is reached

Ensure that the pure gold amount is at least 85 grams. In the example above, 87.5 grams exceeds the Nisab.

Step 3: Calculate the market value

Multiply the pure gold amount by the current price per gram in the market.

Total value = pure gold weight × price per gram

Step 4: Deduct Zakat

Multiply the total value by 2.5% (or divide by 40).

Zakat amount = total value × 0.025

Practical examples of calculation

Example 1: 24-karat pure gold (completely pure@

Data:

• You have 100 grams of 24-karat gold
• Current price per gram: 400 SAR

Calculation:

• Pure gold = 100 × 1 = 100 grams
• Total value = 100 × 400 = 40,000 SAR
• Zakat due = 40,000 × 0.025 = 1,000 SAR

) Example 2: 21-karat gold

Data:

• You have 150 grams of 21-karat gold
• Price per gram ###for pure gold(: 400 SAR

Calculation:

• Pure gold = 150 × 0.875 = 131.25 grams
• Total value = 131.25 × 400 = 52,500 SAR
• Zakat due = 52,500 × 0.025 = 1,312.5 SAR

) Example 3: 18-karat gold

Data:

• You have 200 grams of 18-karat gold
• Price per gram ###for pure gold(: 400 SAR

Calculation:

• Pure gold = 200 × 0.75 = 150 grams
• Total value = 150 × 400 = 60,000 SAR
• Zakat due = 60,000 × 0.025 = 1,500 SAR

Types of gold and rulings on Zakat

The obligation of Zakat varies depending on the purpose of ownership and intention:

) Gold for trade and investment

Anyone who buys gold intending to sell for profit or holds it for long-term investment must pay Zakat by consensus. Gold in this case is treated as a commercial commodity, and Zakat is due at 2.5% of its market value.

Jewelry used daily for adornment

This type has differing opinions among scholars. The Maliki, Shafi’i, and Hanbali schools consider that there is no Zakat on jewelry used daily for personal adornment ###such as rings, bracelets, necklaces(, treating it like clothing and household items.

Meanwhile, the Hanafi school considers Zakat obligatory on it because, ultimately, it is wealth with monetary value.

) Gold ETFs (Exchange-Traded Funds) ###

These funds represent actual ownership of gold stored in secure vaults. Therefore, they are Zakatable like physical gold, and Zakat at 2.5% of their market value is due upon completing a lunar year.

( Gold mining company shares

This type is slightly more complex. If the purpose is speculation )buying and quick selling###, it is treated as a commercial commodity and Zakat at 2.5% of its value is due. If intended for long-term investment, only the distributed profits are subject to Zakat.

When is Zakat due?

Zakat becomes obligatory when two essential conditions are met:

First: Reaching the Nisab Your pure gold amount must be at least 85 grams. If you have only 84 grams, Zakat is not due even if the second condition is met.

Second: Passing the lunar year (Hijri year) A full lunar year must pass since owning the Nisab, i.e., 354 or 355 days (from the date you acquired it). The count starts from the date you own the Nisab, not from the Gregorian calendar.

Once these two conditions are fulfilled, Zakat becomes due immediately and should not be delayed. Delaying it without a valid excuse is considered a sin and a wrongdoing.

Who are the eligible recipients of Zakat on gold?

Zakat is not given to anyone; it is restricted to specific categories according to the Quranic text:

The eight categories deserving:

1. The poor: Those who lack sufficient food, clothing, and shelter

2. The needy: Those with some income but insufficient to meet their needs

3. Zakat collectors: Officials tasked with collecting and distributing Zakat

4. Those whose hearts are to be reconciled: Those given to strengthen their faith or gain favor for Islam

5. Ransoming slaves: Freed slaves and those seeking emancipation

6. Debtors: Those burdened by debts they cannot repay

7. In the cause of Allah: Spending on projects serving religion and society

8. The wayfarer: The traveler in need who is stranded in a foreign land

Who does not deserve Zakat?

Certain groups are prohibited from receiving Zakat:

• The Prophet’s family and Banu Hashim due to their wealth being sanctified and free from impurity

• The wealthy and capable of working who neglect their work out of laziness

• Kafir (disbelievers) (but they may receive general charity and kindness)

• Those whom you are obliged to support financially, such as parents, spouses, and children

• The lazy and able-bodied who neglect earning out of complacency

Importance and benefits of paying Zakat

Paying Zakat on gold is not merely a religious duty but has profound benefits:

Individually:

• Purification of wealth and soul from greed and stinginess
• Increase in barakah (blessing) and tranquility in sustenance
• Strengthening the relationship with Allah
• Earning reward and divine pleasure

Socially:

• Achieving solidarity and cohesion among community members
• Redistributing wealth and reducing social inequality
• Fulfilling the needs of the poor and needy
• Promoting social justice

Conditions and prohibitions in paying Zakat

Several rules must be observed to ensure the validity and purity of Zakat:

• No delay: It must be paid immediately upon becoming due
• Not deducted from old debts: It is paid from new, pure wealth
• Adherence to designated categories: It should only be spent on the eight specified channels
• No showing off (riya’): It should be given solely for Allah’s sake
• Paying the full amount: The obligation must be fulfilled completely
• Not paid from unlawful wealth: Zakat from forbidden wealth (e.g., usury, haram earnings) is not accepted
• Not given to undeserving relatives: It should not be given as a favor to relatives who are not eligible

Frequently Asked Questions

Q: Is Zakat obligatory on inherited gold?
A: Yes, if the conditions (Nisab and passing the lunar year) are met from the date of inheritance.

Q: Can Zakat be paid in cash instead of gold?
A: Yes, it is permissible to pay Zakat in cash equivalent to the market value of gold at the time of payment.

Q: What if the gold amount drops below the Nisab before completing the lunar year?
A: If it drops below the Nisab before a full year passes, the obligation is waived. The counting restarts anew.

Q: How is the Nisab calculated when combining gold of different karats?
A: Convert all types of gold to their equivalent in pure gold, then sum. If the total reaches 85 grams of pure gold, Zakat is due.

Q: Is Zakat applicable on jewelry made of a mixture of gold and silver?
A: Yes, if intended for saving, it should be calculated separately. If for regular adornment, some scholars may consider it not obligatory.

Q: What is the ruling on Zakat on gold mixed with a large proportion of cheap metals?
A: Zakat is calculated based on the actual amount of pure gold in it, and the amount due is extracted accordingly.