Calculate Zakat on Gold | IslamicFinanceGuru – IslamicFinanceGuru
This article simply breaks down when zakat payable on gold.
We will discuss:
- Is zakat due on gold?
- What zakatable assets are in gold?
- A Practical Example
- Where you can calculate your zakat
1. Is zakat due on gold?
Yes – with some exclusions. The key reason is that there are explicit ahadith and verses requiring zakat to be paid on gold. Here’s one:
‘In the case of gold, you have nothing to pay until you own 20 dinars. If you have 20 dinars and you have had it for a year, the duty is to pay half a dinar.’ (Abu Dawud).
The underlying philosophy of zakat is that you pay it on liquid cash-like assets, and not on investments, business assets, machinery and the like. Gold is usually seen as a liquid investment. But there are exceptions – more on that later.
2. What zakatable assets are in gold?
Gold and silver are zakatable in full. This is whether they are in the form of jewellery, coins, etc.
Calculating it is simple. You take the value of your gold or silver and pay zakat on 2.5% of the value.
1 gram of gold is approx. £40. 2.5% of this = £1. Therefore, you need to pay £1 per gram.
However, this excludes jewellery in day-to-day use e.g., your wedding ring or necklace. The reasoning is that this is part of your everyday dress – rather than a pure investment.
Please note though, that the Hanafi school typically even requires you to pay zakat on jewellery you wear day-to-day. For what it’s worth, our personal view is the majority of other schools here – that zakat on such jewellery is not required.
3. Practical Example
Zara has gold from her wedding in a vault at home. She doesn’t really wear this and sees this mainly as an investment. It’s time to pay her zakat.
Her gold ring and necklace – which she wears regularly – is zakatable according to the Hanafis, but not zakatable according to most other schools. We at IFG take the view it’s okay not to give.
She also has some jewellery that she wears on special occasions. She would have to pay zakat on this depending on how often these occasions are. It’s probably best to pay zakat on it to be safe.
She goes to a local jeweller to get her wedding gold weighed and tell her the value of the gold she had stored. She could have alternatively, weighed it at home and gone on the internet to get a quote for the day rate per gram.
The jeweller says she has £5,000 worth of gold. She must pay 2.5% of this towards her zakat. Therefore, Zara will pay £125.
4. Calculate your zakat here
Here is a simple and easy way to calculate your zakat using our comprehensive zakat calculator.