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A discourse on zakaat, sadaqah and income tax (1)

  • Introduction

    Zakaat, Sadaaqah and Income Tax are all forms of financial obligations demanded from the citizens of a country or people generally either by a government/social institution, religious institution or out of philanthropy. Though they have many similarities, these three concepts have outlined differences.

    Albeit, as the world advances and globalisation sets in, new perceptions have crept into the understanding of these concepts. While some people opine that Zakaat and Sadaaqah are the same, some believe that the payment of income tax is a substitute for the payment of Zakaat. How valid are these assertions? These and other related issues are what the essay attempts to discuss.

    Defining the concepts: Zakaat

    Plainly, Zakaat means to ‘purify’. That is, the purification of a Muslim’s wealth and soul. Purifying wealth means using part of one’s assets to cater for the welfare of the needy so as to bring about a fair and equitable wealth distribution in the society. Spending part of one’s wealth on others (with love) frees one from hatred, jealousy, selfishness, uneasiness, greed, and so on; this is soul purification. Technically, Zakaat is a fixed percentage collected from the surplus wealth and earnings of a Muslim and then redistributed or reallocated to defined beneficiaries.

    Zakaat is essentially a religious duty. However, it also has charitable, humanitarian and socio-economic significance. It is a form of almsgiving that encourages one to be altruistic and have gratitude towards Allah’s bounties. Allah says in the Holy Quran, Surah Al Muzzamil; verse 20:

    ...and establish regular prayers and regular charity; and loan to Allah a beautiful loan. And whatever good ye said forth for your souls, ye shall find it in Allah’s presence, yea, better and greater in reward and seek ye the blessing of Allah, for Allah is oft-forgiving, Most Merciful.

    Furthermore, there are some specified conditions guiding the administration of Zakaat. These conditions can be basically grouped into three—the performer, the asset, and the beneficiary. First, A Zakaat performer must be a Muslim who is of a certain age. The second condition is that the person must have an asset on which Zakaat is due. For Zakaat to be due on an asset, it must meet the following conditions: assets must be acquired for the purpose of generating wealth e. g. livestock, crops, and so on. (Zakaat is not mature or payable on fixed assets like building unless the building is used for commercial enterprise e. g.  Rents); the asset must exceed the minimum value termed Nisab; the asset must satisfy the condition of Haul (the completion period for a Zakaat asset, which is usually one Islamic/Hijri year). The third condition (the beneficiary) borders on the fact that Zakaat is not just meant for anybody but for some certain group of people specified in the Holy Quran, At-Taubah; verse 60:

    Alms are for the poor and the needy, and those employed to administer the (funds); for those whose hearts have been (recently) reconciled (to the truth); for those in bondage and in debt; in the cause of Allah; and for the wayfarer: (thus is it) ordained by Allah, and Allah is full of knowledge and wisdom.

    To recap, the Zakaat beneficiaries are the poor, the needy, the administrators of zakaat, the sympathisers, the free slaves, those who are in debt, for the cause of Allah, and for those who are stranded during a journey.

    There are also types of Zakaat, namely; Zakaat Fitr and Zakaat Al-Mal. Zakaat Fitr is made once in every Muslim Hijri calendar. It is usually performed any time between the first day of Ramadan and the first day of Shawal. This type of Zakat is for every Muslim; the young and the aged, the rich and the poor. Zakaat Al-Mal is also an annual payment but it’s restricted to the rich Muslims. This type of Zakat is compulsory for anyone that meets the aforementioned conditions (the performer, the asset, and the beneficiary). Zakat due is 2.5% of the total wealth of an individual.

    Sadaqah

    Sadaaqah is a volunteer act of spending for the cause of Allah. It includes any act of giving out of compassion, love, companionship, or kindness. It is not necessary that Sadaqah is given in material forms. It could also be in kind—kind actions/words. Sadaqah can be given during at any period. 

    Income tax

    Income tax is a government levy on fiscal income made by both corporate companies/organisations and individuals within its authority.  Income tax forms part of the funds that the government uses to execute its activities and provide basic infrastructure—good road, drinkable water, and so on. Income tax can also be mainly divided into two; personal and corporate income tax. Personal income tax is levied on individual workers while corporate tax is imposed on the profits made by companies/organisations.

    Read the continuation of the article here.

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