The only reason for the importance of Zakat is that it is an important pillar of Islam. Different scholars may have different definitions of Zakat but in simple words, “Zakat is the Purification of money”. Zakat is due after 1 year of keeping the asset. These assets include everything excess from your needs.
Zakat is totally different as the tax is imposed by National Govt but Zakat is part of the belief in Islam. Every country imposes different types of taxes depending upon the economic condition
Zakat and Tax difference is also observed that Zakat is for deserving people and must be delivered by the one who is deducting it but Tax is paid to Govt and they utilize the amount as they want to.
“Zakat is a transfer payment which Sahib –e – Nisab Muslims make at given rates by themselves or through the Islamic state to the poor and the needy in or after the month of Rajab.
Difference between Zakat and Tax
Zakat is absolutely different from tax which is imposed by the Govt. the main differences are as under
| Zakat | Tax |
|---|---|
| Zakat Payment is the Religious duty of Muslims | Paying Tax is the National Duty of all citizens |
| It is imposed on only Muslims who meet the requirements | Tax is payable by every citizen who has the ability |
| Zakat is a compulsory payment and not remitted | Tax is compulsory payment & remitted by Govt. |
| Zakat rates are fixed. They are mentioned in Holy Quran & can not be changed | It is changeable, Govt. may change it according to the economic condition of the country |
| It can be paid to individuals by individuals | It is to be paid by individuals to the Govt. |
| Beneficiaries of zakat are mentioned in Islam. They can spend it anywhere | Tax collection by govt is subjected to spending on where Govt. wants too |
| Zakat Nisab is fixed | Tax amount depends upon income/sales and can be changed |
| It is to be paid after the completion of a year | It can be paid anytime |
| Zakat is imposed on all goods like silver, animals, gold, property, agricultural income, and more | Imposition of tax is based upon income & sales |
| The objective behind paying Zakat is to please Almighty Allah by spending financial resources and helping poor | The tax collection objective is to spend collected amounts on developments and the welfare of society |
| Zakat purifies the wealth | Paying taxes doesn’t purify wealth. It saves from legal actions |
| It’s fixed and not variable | Tax is progressive |
| Zakat creates a feeling of being a Muslim society member irrespective of regional limits | The tax creates native feelings |
| Zakat payments don’t facilitate payer | Tax Payers are facilitated by the Govt. |
| Collected Zakat can be spent anywhere without any boundaries | Collected tax is subjected to be spent on collected region only |
| Zakat Imposition is based upon those who have the ability. There is nothing like indirect or direct zakat | The tax is imposed on everyone using direct and indirect tax patterns |
| NO corruption is observed in the zakat collection | A lot of corruption is observed in tax collection |
| Zakat Payment is the Religious duty of Muslims | Paying Tax is the National Duty of all citizens |
CONCLUSION: Keeping in view the above whole difference in Zakat and Tax, We know that It is the main tool of fiscal policy of an Islamic state. It provides financial assistance to poor persons, raises the aggregate growth of the economy, plays a vital role to stabilize all the fiscal variables, and makes the country prosperous.
Zakat ASSESSMENT- Who should Give Zakat
For the assessment of Zakat, the following must be kept in view.
Sahib-e-nisaab Muslim
A Muslim who owns and keeps in his or her possession at least 7.5 tola gold or 52.5 tola silver or cash money to the equivalent value is considered a sahib e niqab Muslim. It is his compulsion to pay Zakat at its prescribed rates by Quran and Hadith.
Zakat on Exposed and Unexposed wealth
Exposed wealth is the wealth that is exposed to society e.g. agricultural goods, camels, sheep, minerals, etc. On the other hand, unexposed wealth is the wealth that remains unexposed to society e.g. gold, silver, cash, liquid assets, etc.
The rates of Zakat
Zakat is paid at the following fixed rates.
Gold, silver cash:
For at least 7.5 tola gold, 52.5 tola silver, or the equivalent value in terms of business inventories or commercial goods or cash money, the rate of Zakat is 2.5% of the total value of the goods or money.
Agriculture:
Zakat which is called usher is paid at the rate of 10% from the agricultural output of the land which is irrigated by natural sources and is paid at the rate of 5% from the output of the land which is irrigated by artificial sources like canals, tube wells, etc.
- Animals:
- Zakat is paid on the commercial animals at the following rates:
- One goat from 40-120 goats. Two goats from 121-200 goats and three goats from 201-300 goats.
- One cow from every 40 cows.
- One camel from each 5 camel
- Minerals
Zakat is paid on minerals e.g. coal, iron, salt, etc. at the rate of 20%.
BENEFICIARIES OF ZAKAT – Who can receive Zakat
The following can be beneficiaries of Zakat.
The poor
These are the people who cannot be treated as sahib-e-nisab.
The needy
These are the people who are unable to earn their living e.g. handicapped, disabled, orphans, etc.
Collectors of Zakat
These are the people who collect and distribute Zakat among the poor and the needy. Their salaries are paid from the Zakat fund.
The new Muslims
These are the people who have recently converted to Islam.
The Slaves
Zakat can be used to make free the slaves and prisoners of war from their masters and enemies.
The debtors
People who are heavily indebted can get Zakat to repay their debts provided that the debt is not taken for a sinful purpose.
The travelers
The travelers can get Zakat to complete their journey in case they fall in need of money.
Mujahideen
Zakat can also be given to Mujahideen to prepare them for jihad. Also, the dependents of the martyrs and the religious educational institutions can seek assistance from the Zakat fund.
Thus, Zakat is a source of financial assistance for poor and needy persons.
Importance of Zakat
ECONOMIC AND SOCIAL IMPORTANCE OF ZAKAT
The following facts reflect the Social and Economic Importance of Zakat.
Purification of the soul
Zakat purifies the soul of contributors from the evils of miser ness. It makes them humble and God-fearing. It also creates wealth discouraging love among people.
Healthy growth of the community
Zakat leads to the healthy growth of the economy and the community. It uplifts the less fortunate members of society.
Narrow Down the Economic Inequalities
Zakat narrows down the economic inequalities in the community to the minimum possible limit. The rich may not grow richer and the poor poorer.
Wider circulation of wealth
Zakat increases the speedy circulation of wealth. It discourages hoarding and provides an automatic mechanism for the flow of wealth from the rich to the poor thus, it widens the circulation of wealth in the community.
Main Source of Income
Zakat occupies a central position in the financial structure of a Muslim state because it contributes too much towards the national treasury and it provides sufficient funds to Govt.
Fair Distribution of Wealth
Zakat meets an important purpose for spreading and distributing wealth that becomes just and equitable. It guarantees that income is not centralized rather it moves very rapidly among different groups of society.
Minimizes Unemployment
Zakat is a very vital instrument for removing unemployment. The money received by the people can be used and the poor can start a business.
Economic Stability
The problem of instability does not take place in an Islamic economy due to the mechanism of Zakat. Zakat promotes the velocity of circulation of money due to which AD for goods and services rises. This determines the level of investment, income, and unemployment on a stable footing.
Self-reliance
Zakat eliminates poverty and diversity from society. It brings a number of prosperity. People can take care of each other and in such a way Zakat enables an economy to be self-reliant.
Capital accumulation
By Zakat, people can use their liquid assets to promote capital formation in the country. They invest their assets due to which the growth rate of the economy goes up and the country gets prosperity.
Mobilization of resources
Such individuals who get income in the shape of Zakat are in a position to utilize the available resources. In this way, the maximum use of resources becomes possible.
Social security
Zakat fund not only covers the poor and the disabled, but it also provides social security to unemployed individuals.
Social welfare
Hospitals, schools and handicrafts centers for the poor can be constructed by making use of the Zakat fund. This promotes social welfare in the country.
Anti-social activities
Zakat is paid obviously from rizq-e-halal. thus, the Muslims who pay Zakat refrain themselves from anti-social activities like hoarding, smuggling, etc.
Control of crimes
The major cause of crimes particularly theft is the poverty of people. The problem of poverty can be easily overcome by Zakat. In such a way, the crime rate can be controlled.
Importance of Zakat for Wealth Production
Higher Liquid Assets
Zakat discourages hoarding and people can make use of their liquid assets to promote saving, investment, and capital formation in the country. They invest in various sectors of the economy as a result of aggregate production in the economy going up.
Higher Velocity of Circulation of Money
Zakat promotes the velocity of circulation of money due to which aggregate demand for goods and services increases. It increases the level of investment, income, and employment
Higher Capital Formation
Zakat is paid on saving which remains accumulated for at least one year. Therefore it brings down the absolute amount of saving with a person .to maintain his consumption standard, he gets stimulus to increase the level of saving. hence, marginal saving goes up which can be used to make additions to the existing capital stock of the country. This will certainly promote the production level in the economy.
Higher Efficiency
Since Zakat increases the aggregate demand for consumer goods, the consumption function of the community in a macro sense may shift upward. the economy would become more efficient.
Importance of Zakat for the Distribution of Wealth
Automatic and Fair Distribution
Since 2.5% of the wealth of the rich is transferred to the poor every year in the form of Zakat. It means the whole wealth of the rich is transferred to the poor section of the community in the forty years. This provides an automatic mechanism for the flow of wealth from the rich to the poor, due to which wealth is fairly distributed among different sections of society.
Better Allocation of Resources
Transfer of money from the rich to the poor in the form of Zakat would mean that demand for basic necessities of life will increase. This will encourage their production. Scarce resources would be drifted away from the production of luxuries to that of necessities. This is a better allocation and distribution of scarce resources.
Social Welfare
The construction of social welfare institutes with the Zakat fund ensures distributive justice in the economy.
Better Living Standard
Zakat provides a better quality of life to the poor through the process of re-distribution of income.
Wider Circulation of Wealth
Zakat curtails the ratio of wealth concentration in a few hands.
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