How Much Zakat Is Due on Gold & How to Calculate It

Zakat is an obligatory charitable contribution in Islam, serving as a purification of wealth and a means to support those in need. This financial obligation holds significant spiritual and social importance, ensuring the redistribution of resources within the community. This article guides understanding and calculating Zakat on gold holdings, detailing thresholds, calculation methods, and purity/valuation considerations.

The Nisab Threshold for Gold

The Nisab represents the minimum amount of wealth an individual must possess for Zakat to become obligatory. For gold, this threshold ensures only those with financial capacity contribute. The established Nisab for gold is 85 grams of pure gold, approximately 2.73 troy ounces.

If a person’s total gold holdings meet or exceed this amount, Zakat becomes due. This threshold is determined by Islamic jurisprudence, providing a standardized measure for eligibility. The Nisab’s monetary value fluctuates daily with the market price of gold, meaning the exact dollar amount required will change over time.

Calculating Zakat on Gold

Calculating Zakat on gold involves a straightforward process once eligibility criteria are met. The fixed Zakat rate applied to gold is 2.5% of its total eligible value. This calculation is based on the current market value of the gold on the day Zakat is due, rather than its original purchase price.

The “Hawl” is the completion of one full lunar year. For Zakat to be obligatory on gold, the wealth must have been owned and maintained at or above the Nisab threshold for an entire Hawl, approximately 354 days. If gold holdings drop below the Nisab at any point during the lunar year, the Hawl period may reset.

To illustrate, consider an individual with 100 grams of pure gold, where the current market value is $70 per gram. The total value would be 100 grams multiplied by $70/gram, equaling $7,000. The Zakat due is 2.5% of this total value, calculated as $7,000 multiplied by 0.025, resulting in a Zakat payment of $175.

Purity and Valuation of Gold

Valuing gold for Zakat requires considering its purity. Zakat is due on the pure gold content within an item, not on other metals or gemstones mixed with it. Gold purity is commonly measured in karats, with 24-karat gold representing pure gold.

Different karat values, such as 22K or 18K, indicate varying proportions of pure gold. For instance, 18-karat gold contains 75% pure gold (18 divided by 24). To determine the pure gold content for Zakat calculation, multiply the total weight of the gold item by its karatage divided by 24. For example, if an individual possesses 150 grams of 18K gold, the pure gold content is 150 grams multiplied by (18/24), which equates to 112.5 grams of pure gold.

The value used for Zakat calculation must be the current market value of the pure gold content. This valuation should not include any added artistic value, craftsmanship, or the value of embedded gemstones. Obtain an accurate weight and current market price for the pure gold content.