How To Calculate Zakat On Gold?

People often think it's hard and confusing to figure out how much Zakat is to pay for their jewelry. It is mostly because there needs to be clearer information about the subject.

If your jewelry is made of more than one metal, you only have to Pay zakat online if gold or silver make up at least half of it.

It is okay to give real gold and silver to Zakat. For example, someone with 100 grams of gold jewelry can give 2.5 grams of gold as Zakat on the jewelry. If you have gold and silver, you should weigh them separately.

What Is Zakat On Gold

If your gold or silver jewelry has diamonds, gemstones, pearls, etc., set in it, and you want to know how much the precious metal weighs, the best way to do this is to take your jewelry to a professional jeweler.

A professional jeweler will know how to judge the weight and quality of the gems and will be able to give you an estimate of their weight without having to take the stones out of the jewelry.

Zakat can also be paid in cash, which is fine. It is done by paying Zakat equal to 2.5% of the market value of the weight of the jewelry.

For example, if someone has 10 grams of gold jewelry, they must pay Zakat equal to the market value of 0.25 grams of gold (2.5% of 10 grams). So, if gold is worth £38* per gram on the market (as of March 24, 2021), they will have to pay £9.50 (0.25 x 38) as Zakat.

Do you pay Zakat on all of your gold?

Yes, if it reaches the Zakat threshold (nisab) for money, except for a woman's usual collection of traditional jewelry, says the most popular scholarly opinion. (Most Hanafi scholars disagree and say that jewelry should be subject to Zakat.)

What does nisab mean in gold?

Eighty-five grams is the best way to measure gold's nisab (Zakat threshold) (g). You can also multiply the price of a troy ounce of gold by the nisab amount in troy ounces, which is 2.73295. (The troy ounce, not the US ounce, is used to measure gold.)

Here are the equations for figuring out each measure's nisab for gold.

US$ per gram of gold x 85 grams = Nisab (most precise)

Gold price per troy ounce in US dollars times 2.7329 troy ounces = Nisab

At the time this was written, 3:33 p.m. on March 7, 2022, the maths would be:

$64.2F1 x 85 g = $5,457.85

$1,998.70 x 2.73295 t oz = $5,462.35

Between the two measures, you can see that the nisab threshold for gold is different by about $4.50. Again, 85 g is a more accurate unit.

It means that if you own 85 g or more of gold or $5,457.85 or more in cash for a Zakat year (called a hawl, which is one full Islamic Hijri lunar year, not a solar year). 

The Zakat year (hawl) starts when you have enough nisab for that type of wealth, which in this case is gold and money. The Zakat Due Date (ZDD) is the last day of the lunar year that begins on the date of the nisab accumulation.

Why is Zakat necessary for gold?

Zakat is a tax that every Muslim who owns all of their wealth must pay when it reaches a certain age and level of growth. Gold is the most valuable Zakatable asset because it can grow and produce more.

Muslim scholars have also made gold the standard weight measure for the nisab threshold on the currency because it has proven to be the most constant and stable unit of fungible wealth forms like precious metals, coinage, currency, or money.

Because of how important gold is to the economy and how it is used to measure different types of wealth, hoarding it can quickly become a way for a few people to get rich. Also, it would leave most people poor if its owners don't put it into circulation.

The tax on pure gold and jewelry made of gold

2.5% of the market value on the valuation date should be used to figure out Zakat (Lunar date). Most Ulema prefers the market value as of the date of calculation rather than the price at which the property was bought.

1-   Zakat on Rare and Semi-Rare Stones

Only if these precious stones are used for business (as an inventory) will their market value be considered when calculating Zakat.

On the date of Zakat Calculation, one can figure out the Saleable Value of Items-at-Hand.

 2- Zakat on Cash and Savings Accounts

You can pay Zakat at a rate of 2.5% on all cash. Also, bank balances in your savings, current, or FD accounts.

The money should have been in the bank for a full year. Most of the time, the balance changes based on what each person needs. You can make the best decision you can.

3-   Zakat on Silver

Zakat is a must-on for pure silver, silver jewelry, silver utensils, silver decorations, and all silver crockery and silverware at a rate of 2.5% of the market price.

4- Loans, Funds, etc.

Zakat is due by you on loans you have provided to your friends and family. It's cash. To calculate your net worth, subtract your loans.

If you trust your money's return, don't count it as riches. You may add it to your fortune after receiving your money. 

Conclusion

Zakat is an important part of Islam. Also, it is a way to make sure your money is clean for Allah's will (SWT). It is due on things you own for more than one lunar year. It should be 2.5% of all the money in the country.

The money is first given to the people who collect Zakat. Then to poor Muslims, new Muslims, Islamic clergy, and other people.