Zakat is one of the five pillars of Islam, a means of redistributing wealth and supporting those in need. It is obligatory on all eligible Muslims and is applicable on a range of assets, including gold. Calculating Zakat on gold can seem complex, especially considering different forms of gold such as jewellery, coins, or bullion. This guide aims to clarify how to calculate Zakat on gold, taking into account various factors such as gold type, Nisab (the minimum amount of wealth that makes Zakat obligatory), and methods of valuation.
Understanding Nisab for Gold
The Nisab threshold for Zakat on gold is crucial to determining whether you owe Zakat. Nisab refers to the minimum wealth a person must possess for a year before they are liable to pay Zakat. The Nisab threshold is either measured in gold or silver. As of 2024, the Nisab for gold is 87.48 grams of pure gold.
In essence, if you own gold that weighs 87.48 grams or more, and you’ve possessed it for at least a year, you are obligated to pay Zakat at the rate of 2.5% of its value.
Types of Gold on Which Zakat is Applicable
Zakat is payable on various forms of gold, whether they are held as jewellery, bullion, or coins. Let’s examine the specific categories:
1. Gold as jewellery
Zakat must be paid on gold jewellery if it meets the Nisab threshold. Some scholars differ on this, especially for jewellery used for personal adornment. According to the Hanafi school, Zakat is obligatory on all forms of gold, even if they are used personally. However, some other schools (e.g., Shafi’i) state that gold used as personal jewellery may be exempt unless it exceeds the Nisab.
Example: If you own 100 grams of gold jewellery, and the price per gram is $60, the total value would be $6,000. You would then pay 2.5% Zakat, which equals $150.
2. Gold Held as Investment
Any gold held as an investment, regardless of whether it’s in the form of bullion, coins, or bars, is always subject to Zakat if it exceeds the Nisab.
Example: If you own gold coins weighing 90 grams, with a market value of $5,400, you’d owe 2.5% of that amount, which equals $135 in Zakat.
3. Mixed Metal jewellery
Gold jewellery mixed with other metals (e.g., white gold or alloys) also requires Zakat, but only on the pure gold content. The gold content must be calculated separately from other materials.
Example: For a white gold bracelet weighing 50 grams of which 18 carats is pure gold (i.e., 75% gold content), the pure gold content is 37.5 grams. Zakat is calculated only on that portion.
Determining the Value of Your Gold
To accurately calculate Zakat on your gold, you need to determine its current market value. There are two primary methods to do this:
1. Consult a Jeweler: Visit a jeweller who can assess your gold’s value based on its weight and current market rate. This method gives you a direct evaluation of how much your gold is worth.
2. Use the Current Gold Price: Alternatively, you can calculate the value yourself by multiplying the total weight of your gold by the current price per gram. Websites such as the World Gold Council offer live updates on gold prices.
Example: If the current price of 1 gram of 24-carat gold is $60, and you own 100 grams of gold, your gold’s value would be $6,000. Zakat due = 2.5% of $6,000 = $150.
Calculating Missed Zakat on Gold
If you haven’t paid Zakat on your gold for previous years, you’ll need to calculate the missed amounts. When doing so, the Zakat for each year should be based on the value of the gold during that specific year. Historical gold prices can be referenced from financial websites, or you can consult a jeweler for past rates.
Example: Assume you owned 100 grams of gold in 2021, valued at $55 per gram. The total value of your gold that year would be $5,500, so you would owe $137.50 for that year. In 2022, if the value rose to $60 per gram, your gold would be worth $6,000, and the Zakat due for that year would be $150. Add up the amounts for all the years you missed to determine your total Zakat liability.
Special Considerations
Men’s Gold: Even though men are discouraged from wearing gold, they are still required to pay Zakat on any gold they own, such as watches or investments.
Gifts and Mahr (Dowry): Gold received as a gift or as part of a dowry (Mahr) is also subject to Zakat if it meets the Nisab.
GoldPlated Items: jewellery that is merely goldplated, without significant gold content, is not Zakatable.
What If You Cannot Afford to Pay Zakat on Gold?
If you are unable to pay Zakat due to financial constraints, Islamic law provides flexibility. You can either:
1. Sell a portion of the gold to pay the Zakat.
2. Pay the Zakat in kind by giving a portion of the gold itself.
Conclusion
Zakat on gold ensures that wealth circulates within society, benefiting those in need. By understanding the Nisab threshold, the types of gold liable for Zakat, and the methods for determining its value, you can fulfil this essential religious obligation. Remember, Zakat on gold is not merely a financial calculation but a means of purifying your wealth and earning blessings. Make sure to calculate your Zakat annually, consult with knowledgeable sources, and ensure that your Zakat is distributed correctly.