Question: Do I pay Zakat on my Savings only or on my checking account too?
Answer: Zakat is due on ANY surplus wealth. It must be more than the Nisab and is in your possession after one year passes. This includes: Savings accounts, checking accounts, actively invested shares or Mutual Funds. It also includes cash on hand, gold and silver (bullion or jewelry, etc). If you own a business it includes any inventory or property which is currently for sale, as well as business accounts (similar to those above).
Example: Ahmed owns his own business. He has a savings account with 10k and a checking account with 4k. He also owns a car posted on Craigslist for sale at 8k. His business account contains 4.5k, and he does not own any business inventory. He has possessed Nisab for one year, and he usually pays his Zakat on the 1st of Ramadan. He will pay 2.5% on 26,500 USD. He will pay 662.5.
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1. Who has to pay Zakat?
Zakat is due on the wealth of any Muslim, young or old, male or female, that is held in savings for one calendar year and is more than the Nisab.
Example: If both you and your children have separate savings of 1000 dollars or more for one year, you must pay the Zakat on both accounts, not just yours. $25 for your savings, and $25 for your childs. Continue reading