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 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 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.
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Difference between Zakat and Tax
Zakat is absolutely different from tax which is imposed by the Govt. the main differences are as under
• It is imposed on only Muslims who are meet requirements
• Zakat is complusory payment and not remitted
• Zakat rates are fixed. They are mentioned in Holy Quran & can not be changed
• It can be paid to individuals by individuals
• Beneficiaries of zakat are mentioned in Islam. They can spend it anywhere
• Zakat Nisab is fixed
• It is to be paid after completion of a year
• Zakat is imposed on all goods like silver, animal, gold, property, agricultural income and more
• Objective behind paying Zakat is to please Almighty Allah by spending financial resources and helping poors
• Zakat purifies the wealth
• It’s fixed and not variable
• Zakat creates feeling of being muslim society member irrespective to regional limits
• Zakat payments doesn’t facilitate payer
• Collected Zakat can be spend anywhere by anywhere without any boundries
• Zakat Imposition is based upon those who have ability. There is nothing like indirect or direct zakat
• NO curroption is observed in zakat collection
• Tax is payable by every citizen who has ability
• Tax is compulsory payment & remitted by Govt.
• It is changeable, Govt. may change it according to economic condition of country
• It is to be paid by individuals to the Govt.
• Tax collection by govt is subjected to spend on where Govt. wants too
• Tax amount depends upon income/sales and can be changed
• It can be paid anytime
• Imposition of tax is based upon incomes & sales
• Tax collection objective is to spend collected amounts on developments and welfairs of society
• Paying tax doesn’t purify wealth. It saves from legal actions
• Tax is progessive
• Tax creates native feelings
• Tax Payers are facicilitated by the Govt.
• Collected tax is subjected to be spent on collected region only
• Tax imposed on everyone using direct and indirect tax patterns
• A lot of curroption is observed in tax collection
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 make the country prosperous.
Zakat ASSESMENT- Who should Give Zakat
For the assessment of Zakat, the following must be kept in view.
Sahib-e-nisab 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 nisab 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 which is exposed to the society e.g. agricultural goods, camels, sheep, minerals, etc. On the other hand, unexposed wealth is the wealth which remains unexposed to the 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 agriculture 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 goat from 121-200 goats and three goats from 201-300 goats.
- One cow from each 40 cows.
- One camel from each 5 camels
- Minerals
Zakat is paid on mineral 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, disable, 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 wars 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 the 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 the 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 contributor 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 the society.
Narrow Down the Economic Inequalities
Zakat narrows down the economics inequalities in the community to the minimum possible limit. The rich may not grow richer ant he 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 rich to the poor thus, it widens the circulation of wealth among 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 national treasury and it provides sufficient fund 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 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 stable footing.
Self-reliance
Zakat eliminates poverty and diversity from the society. It brings amount 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 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 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 due to the poverty of people. The problem of poverty can be easily over come 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 goes 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, consumption function of the community in a macro sense may shift upward. the economy would become more efficient.
Importance of Zakat for 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 the 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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