Zakāh (زكاة) is the compulsory alms-giving for which Allāh (عَزَّ وَجَلَّ) has given the order in the Qurʾān. It is one of the five pillars of Islām. Its status is obligatory (fard), so it is obligatory upon every mature, sane man and woman whose wealth is above the minimum threshold, called nisāb. A minimum of 2.5% of their wealth must then be given as zakāh. Zakāh can only be given to the specific eight categories mentioned in the Qurʾān in chapter 9, verse number 60 (Taubah 9:60). If it is not given to any of these eight categories then it shall not be considered to be zakāh and the individual is not relieved of his obligation.
Zakāh is only payable on lawful (halāl) earnings. So if earnings are generated by sale of unlawful items or services such as sale of alcohol, lottery tickets, or cigarettes or acquired by unlawful methods such as lying to get state benefits, or lying to increase the price of sale items, then such earning are not liable for zakāh. Unlawful earning should be returned to their rightful owner or given away without expecting any reward, similar to giving away interest (ribā).
In odrer for the donor of zakāh to fulfill his religious obligation all the zakāh that he or she donates must reach those eligible for zakāh in full, otherwise the duty is not discharged. If the donor is not giving his or her zakāh direcly to the recipeints of zakāh then it is the duty of the donor to choose a medium (i.e. any middle person, organisation or charity) which will fulfill their obligation, that is to say, will ensure that all the zakāh donated will reach those eligible to receive zakāh. So it is important to choose a charity very carefully after diligent groundwork whom you will task to distribute your zakāh. In non-Muslim countries the zakāh donor should choose a charity which has a 100% donation policy so that 100% of the zakāh that is given to the charity is passed on the recipients of zakāh. Please see legal edict here on the impermissibility of Muslim charities using zakāh funds for administrative purposes. If the donor is a UK tax payer he/ she can donate more efficiently by making use of the Payroll Giving scheme which can save the donor substanial amounts of money.
According to a report in 2012 Islamic finacial analysts estimated annual zakāh spending exceeded US$200,000,000,000 per year compared to total global humanitarian funding in 2011 of just US$13,000,000,000, according to the UN's Financial Tracking System. Yet about a quarter of the Muslim wordl continues to live on $1.25 a day or less. Islamic scholars and development workers state that much of this zakāh practice is mismanged, wasted or ineffective.
Nisāb is 20 dinārs of gold (equivalent to 0.08748 kilograms of pure gold) or 200 dhirams of silver (equivalent to 0.61236 kilograms of pure silver). This was the exchange rate between dinār and dhiram, 1:10, during the early days of Islām. Nowadays the exchange rate is around 1:75, however, both values are acceptable in Sharia.
If your wealth consists of gold, silver, cash or other assets you should use the nisāb value for silver. If you wealth consists only of gold then use the gold rate for nisāb.
Prices for gold and silver can be found at https://www.bullionvault.com
Note: use price per Kg in pound sterling (£) for U.K. residents.
Nisāb value (based on silver) = 0.61236 x (Price of pure silver per Kg)