Income tax and Zakah
Mu' meneen Brothers and Sisters,
As Salaam Aleikum wa Rahmatullahi wa Barakatuh. (May Allah's Peace, Mercy and Blessings be upon all of you)
One of our brothers/sisters has asked this question:
i would like to know that after paying income tax, are we supposed to pay any zakat and if yes than what will be the criteria for the calculation of zakat in such a case.
thanks and best regards,
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Income tax and zakah
In the name of Allah, We praise Him, seek His help and ask for His forgiveness. Whoever Allah guides none can misguide, and whoever He allows to fall astray, none can guide them aright. We bear witness that there is no one (no idol, no person, no grave, no prophet, no imam, no dai, nobody!) worthy of worship but Allah Alone, and we bear witness that Muhammad (saws) is His slave-servant and the seal of His Messengers.
The ‘income tax’ a worldly government imposes on its citizens is completely different and distinct from the obligatory ‘zakah’ dues which have to be paid by a believer to purify his wealth. The paying of one’s income tax to a worldly government has absolutely no bearing or relevance to the payment of one’s ‘zakah’ dues.
In principle, a believer of means is liable to pay his annual ‘zakah’ @ 2.5% on his total excess wealth (total excess assets after the payment of all liabilities, loans, expenses including the payment of income tax, etc.) which has been in his possession for a period of one full calendar year. One’s annual income or the payment of income tax has absolutely no bearing on one’s ‘zakah’; for ‘zakah’ is to be paid annually on only one’s total excess wealth which has been in his possession for a period of one calendar year.
For example a person earns $10,000.00 a year, expenses of $6,000.00 a year, pays income tax of $3,000, lives in a house worth $100,000.00, has a car worth $5,000.00, has jewelry worth $5,000.00, an extra property investment worth $20,000.00, and a bank savings worth $5,000.00.
The zakah calculation of the above person will be done as follows:
- The income, expenses, and income tax a person pays has absolutely no bearing on his zakah calculations.
- The house one lives in, the vehicle one uses are exempt from ‘zakah’ as they are a necessity being utilized in one’s day-to-day life.
- Zakah of the above person will only be liable on the value of his jewelry (@2.5% of $5,000.00) + the value of his extra property (@2.5% of $20,000.00) + the bank savings (@2.5% of $5,000.00), provided these assets have been in his possession for a period of one full calendar year.
Thus regardless of his income, or expenses, or how much income tax is imposed on him by his government, or the value of his house or his car which he utilizes to live his day-to-day life; the total excess wealth of the above person will be determined at $30,000.00 (jewelry + extra property or investments + bank savings) and he will have to pay 2.5% of #30,000.00 or $750.00 as his ‘zakah’.
Whatever written of Truth and benefit is only due to Allah’s Assistance and Guidance, and whatever of error is of me alone. Allah Alone Knows Best and He is the Only Source of Strength.
Your brother and well wisher in Islam,