How to Calculate Zakat on Gold?

Calculating Zakat on gold is challenging for many Muslims, often due to a lack of knowledge about the process. This uncertainty can cause stress and confusion, delaying their obligatory duty on time. 

Our guide to Zakat on gold offers a clear pathway to understanding and calculating your Zakat obligations effortlessly.

Formula of Zakat on Gold

If your gold holdings exceed the nisab, the Zakat amount can be calculated as follows:

Where:
Gold Value is the current market value of your gold (in grams or troy ounces).  

Steps of Calculating Zakat on Gold

Here, you'll learn everything you need to know about Zakat on gold, including the step-by-step calculation process.

1. Assess the Present Market Value of Gold

The initial stage in Zakat calculation involves establishing the current market value of gold. This enables you to assess the total worth of your gold assets. The current market price of gold can be obtained from diverse sources such as local jewelers, financial websites, or the stock exchange in your country.

2. Evaluate the Total Weight of Your Gold

Next, you'll need to determine the combined weight of your gold assets, including any gold jewelry, coins, or bars in your possession. You can use a digital scale or visit a jeweler for accurate weighing.

3. Compute the Total Value of Your Gold

After identifying the present market price of gold and the cumulative weight of your gold assets, proceed to calculate their total value. This involves multiplying the current market price of gold by the total weight of your gold. 

For instance, if gold is priced at Rs. 19,370 per gram and you possess 150 grams of gold, your gold assets would amount to Rs. 2,905,500 (150 grams x Rs. 19,370 per gram).

4. Determine the Zakat Nisab on Gold and Silver

Once you have computed the total value of your gold, then, you need to determine whether the total weight determined falls within the nisab. The zakat nisab on gold represents the minimum quantity of gold and silver a Muslim must possess before Zakat becomes obligatory. 

Zakat on gold and silver is determined by their value. The Nisab for gold is set at 87.48 grams (7.5 tola) and for silver at 612.36 grams (52.5 tola).

5. Calculate the Zakat Owed on Your Gold

After establishing the total value of your gold assets and ensuring that you surpass the Nisab threshold, you can proceed to compute the Zakat owed on your gold. The Zakat is calculated at a fixed rate of 2.5% based on the total value of your gold assets.

Example of Zakat on Gold and Silver

Now, let’s understand the zakat calculation on gold and silver with the following examples:

Zakat on Gold:

Suppose,
You have 100 grams of gold
The Zakat rate is 2.5%

If the current gold price per gram is approximately PKR 10,000, the calculation would be:

Zakat Amount = 100 g × 0.025 × PKR 10,000/g
Zakat Amount = PKR 25,000

Therefore, you need to pay PKR 25,000 as Zakat for your gold.

Zakat on Silver:

Suppose,
You possess 800 grams of silver
The Zakat rate remains 2.5%

Assuming the current silver price per gram is around PKR 1,000, the calculation becomes:

Zakat Amount = 800 g × 0.025 × PKR 1,000/g
Zakat Amount = PKR 20,000

Thus, you need to pay PKR 20,000 as Zakat for your silver holdings.

Note: These rates can fluctuate, so it’s essential to check the most recent prices. For accuracy and precision, you can use our updated zakat calculator gold.

Conditions For Zakat on Gold

Here are the two main conditions of zakat on gold: 

1. Nisab or Uruf: Zakat is due on the gold you own if it meets a certain threshold called Nisab (for gold not for usage) or Uruf (for gold for usage).
2. Haul: Zakat is paid only if you have completed a year known as Haul, which is 1 Hijri year (355 days). For new payers, it starts when your savings reach Nisab. For regular payers, it starts from the last Zakat payment.

Zakat on White Gold Jewelry

Zakat on white gold is calculated by considering the primary metal in the alloy, which is a mixture of different metals combined together. Here’s how it operates:

Composition of White Gold

• White gold is a blend of gold and at least one white metal (typically nickel, silver, platinum, or palladium).
• The purity of white gold is indicated in karats (similar to yellow gold).
• A typical white gold composition comprises 90% gold and 10% nickel.

Calculation of Zakat on White Gold

Let’s understand the process of calculation of zakat on white gold:

Formula to Calculate Zakat on White Gold

The Zakat amount (Z) is computed by multiplying the total weight of the jewelry (W) by the price per gram of gold (P)) for that specific karat:

Condition for Zakat on White Gold

If the gold content in white gold is over 50% of the total item, Zakat is calculated based on the gold nisab. White gold is treated similarly to regular gold and is subject to Zakat.

Examples of Zakat on White Gold

Note: The price of gold fluctuates, so the final calculation should be according to current prices.

Reasons Behind the Zakat Obligation on Gold and Silver

In Islam, gold and silver are regarded as assets that increase in value, whether in the form of coins, bullion, or crafted items.

If one possesses them at or above the threshold (nisab) determined by the Prophet (PBUH), equivalent to 85 grams of pure gold in modern times. Zakat must be paid on them due to their nature of "increase."

Note: Islam prohibits the display of items it forbids to use, especially for show-off purposes. Items made of gold or silver, if prohibited in form, like a statue or men's jewelry, are considered doubly forbidden.

Rules of Zakat on Gold and Silver

• Gold and silver, regardless of form, are obligated to Zakat, except for women’s jewelry and simple silver items.
• If gold or silver is possessed in forbidden forms like statuary or dinnerware, Zakat is still due on them.
• Artistic pieces, including men's jewelry, are evaluated for Zakat based on their market value rather than just their weight.

Exceptions of Women’s Jewelry from Zakat

In Islam, there are eight reasons why women's jewelry is exempt from Zakat in customary amounts and proportions, which are described as follows:

1. Scholars debate whether Zakat is required on women’s jewelry. Some argue it's not obligatory unless it leads to extravagance, while others believe it may only apply to Prophet Muhammad's (PBUH) wives.
2. The Quran prohibits hoarding gold and silver for financial purposes, suggesting that Zakat may not apply to personal adornments like jewelry.
3. Zakat is generally not obligatory on personal belongings, including animals, tools, primary residences, cars, books, and furniture.
4. Sunni scholars unanimously agree that Zakat isn't mandatory on gemstone jewelry worn by women.
5. Zakat's objective is to safeguard growing wealth assets, but it cannot be fulfilled from the "increment" in jewelry itself, as jewelry doesn't increase as jewelry. Therefore, liquidating jewelry to revert it to its original gold or silver form is required to fulfill Zakat.
6. Once an asset meets the Zakat condition (nisab), the obligation arises. However, when gold and silver are made into jewelry, the Zakat obligation ceases as the intention for growth is removed.
7. Esteemed Companions of Prophet Muhammad, including Aisha, Abdullah ibn Umar, Asma bint Abu Bakr, and Anas ibn Malik, stated that there is no Zakat on women's jewelry, including gold and silver.
8. According to Surah An-Nisa, verse 7, the only Zakat obligation for women regarding their jewelry may be lending it to other women.

In wrapping up, understanding Zakat on gold includes various aspects, from its calculation methods to exceptions. By grasping the formula and rules, one can fulfill this important religious obligation effectively. While Zakat on gold follows specific guidelines and conditions. It's important to understand Zakat well so you can follow the rules and help your community positively.

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