Zakat in Malaysia - FAQ
The payment of Zakat is a religious obligation for Muslims as it is one of the Five Pillars of Islam. In this, there are two different types of zakat to be paid. One is a tithe on property (in the general sense) owned by the Muslim; the other is a voluntary tithe paid during the month of Ramadan (zakat fitrah).
1. Obligation to pay Property Zakat
Any Muslim that owns the property is obligated to pay 2.5% of the value of everything they own as zakat. This refers to property in general and includes various animate and inanimate objects. For instance, the tithe applies to income, savings, gold, livestock, and even company shares.
There are two requirements to be met before a Muslim must pay zakat. Firstly, the ownership of the property must have been obtained within the haul (1 Islamic year). This essentially means that one need only pay Zakat on property that has been owned for a period of one year.
Secondly, the amount of property owned must be above the Nisab value. This is the minimum amount of wealth a Muslim must own before they are eligible to pay zakat. This is to avoid unnecessarily burdening those who own very little, as they may not have enough for themselves.
The Nisab value changes every year and is tied to the value of gold. Basically, the value is determined by the local Islamic council based on the average value of the price of 85g of gold in the past year.
The current Nisab value is RM13,490.00 in Selangor and RM13,968 in the Federal Territories.
2. Property Zakat
Zakat on income and savings takes into account all forms of income and savings.
Income includes salaries, inheritance, freelance work, and passive income like rent and share dividends. Similarly, savings includes all savings and fixed deposit accounts, EPF savings, and even cash on hand.
Deductions for living costs are allowed under this zakat on income and savings. The total amount of deductions depends on the state with which you are paying. Each state Islamic council provides a different value for deductions and you should refer to them for more information.
Our zakat calculator here at iMoney uses information from both the Lembaga Zakat Selangor and the Majlis Agama Islam Wilayah Persekutuan.
Gold and silver
Gold and silver is a little more complicated than other property. For the most part, any investments in the precious metals count towards how much zakat you must pay. This covers both investments where the gold is held by a third party and those stored at home.
Gold jewelry is where the complications begin. In this case, the jewelry is divided into two categories: those that are worn on a regular basis and those kept as investments/heirlooms/remain unused.
Jewelry that remains unused directly count towards the total value of your property. Meaning that zakat needs to be paid on it.
On the other hand, women’s jewelry that is worn on a regular basis does not count towards the total value of your property. There is no clear definition for what a regular basis is, but it generally covers any jewelry that gets used; even if it is only ever brought out for special occasions.
However, Islam does not promote a life of excess and there is a limit (uruf) on the amount of jewelry that can be counted as in use. Owning more jewelry than the uruf value means that you must pay zakat on all of it, regardless of whether it is used or not.
This is a one off tithe that is paid during the month of Ramadan, before the beginning of Syawal. It is a separate zakat and does not count towards how much you pay for property zakat.
The value is determined by the local Islamic councils each year, and Muslims are expected to pay the tithe when Ramadan begins and before the Eid-Fitri prayers on the first day of Syawal.
3. When do you pay zakat?
Muslims are required to pay zakat the moment the value of their property exceeds the Nisab value. This can happen at any time, and there is no annual deadline for the zakat to be paid. If you do not remember when this happened, you are advised to make an estimate and stick to that each year.
4. Where do you pay zakat?
Those living in Selangor can settle their zakat through the eZakat Pay system. It’s a completely online solution and supports payments through online banking and credit cards.
Malaysians from the Federal Territories have several options available. There are a number of Pusat Pungutan Zakat counters located throughout Kuala Lumpur and one in Labuan. Alternatively, the zakat can be paid through the PPZ website using online banking.
Finally, there is the option to pay property zakat through salary deduction with your employer.
5. Tax Rebate
Muslims paying property zakat are allowed to claim it as tax relief when filing for their income tax. This is to prevent them from being taxed twice within the same calendar year. It should be noted that there will still need to be a receipt to prove that the zakat was paid to a recognised government body.