BANK RAKYAT SCHOOL OF BUSINESS AND ENTREPRENEURSHIP

RZB4213 ISLAMIC ACCOUNTING PRACTICES

ZAKAT

BY: MOHAMED NOORULLAH BIN YUSUF IBRAHIM KLC1160027

1. What is zakat? Zakat is an obligatory act ordained by Allah (The Glorified and Exalted) to be performed by every adult and able bodied Muslim. It is an important pillar among the five pillars of Islam. Zakat is a part of the wealth and property that Muslims must pay annually, to help the poor of their community. One of the main purposes of Zakat is to keep those who are wealthy clean, monetarily, from sin. It is a form of Sadaqah (charity) which is obligatory on Muslims.Zakat means grow (in goodness) or 'increase', 'purifying' or 'making pure'. So the act of giving zakat means purifying one's wealth to gain Allah's blessing to make it grow in goodness. A certain fixed proportion of the wealth and of the each and every kind of the property liable to Zakat of a Muslim to be paid yearly for the benefit of the poor in the Muslim community. The payment of Zakat is obligatory as it is one of the five pillars of Islam. Zakat is the major economic means for establishing social justice and leading the Muslim society to prosperity and security. 2. How does zakah different from taxation? A tax is levied on all the citizens of the state while Zakat is levied only on the Muslim members of the society. Zakat is a compulsory payment which must be paid by the Muslims and tax is also a compulsory payment but it is remittable by the government of the state. The Zakat is not remit tenable. Zakat has a religious sanctity behind it because it is one of the five pillars of Islam. But a tax is a compulsory contribution to the state to cover the cost of services rendered by it for the general benefit of the people. The rate of Zakat (i.e. 2.5%) is fixed by the God in the Holy Quran and cannot be changed by the government of the state from time to time to meet its requirements. The nature of the sources of Zakat is fixed but the sources of a tax are variable. The sources of a tax can be diversified in accordance with the need of revenue requirements. 6. The income collected from Zakat can only be spent on deserves of Zakat. The specified items of deserves are laid down by the Holy Quran but taxes can be spent on various requirements as determined by the government of a state. 3.How zakah helps to improve the socio economic status of a state? In economic terms, the Muslim seeks to establish a society where social justice and distributional equity would prevail so that a section of the society does not discriminate and prosper at the expense of the rest of the society. As a matter of fact, an ideal Islamic society strives to abolish all forms of discrimination, prejudice, class differentiation and provide equal opportunity to all members of the society although, according to some Islamic scholars, Islam does not envision absolute equality insofar as distribution of economic resources among individuals is concerned because, operationally speaking, this simply would not be feasible. 4. Who are the recipients of zakat? 1. The poor (Faqir/Fuqara ) - Those without any means of livelihood and material possessions. 2. The needy (Miskeen) - Those without sufficient means of livelihood to meet their basic necessities. For instance, those who, although may have a job, a house and a car, but whose income is below the minimum requirement. 3. The administrators of zakat (Amil) - Those appointed to manage and administer zakat. This category is sub-divided into the following categories: Group of people who go out to the society and determine those who fall Fuqara and Miskeen categories. Those who collect the Zakat money.

The accountant of the Zakat money. The administrator, manager, clerical worker or secretary who puts the files in order. Those who handle Zakat distributions. The auditor who audits overall Zakat management and administration.

4. The sympathizers (Muallaf-at-Quloobuhum) - Those whose hearts are inclined towards or have accepted Islam. 5. To free slaves (Riqab) - Zakat can also be used to free slaves or captives.

6. Those who are in debt (Gharimin) - Zakat can be used to pay off the debts of a person who has borrowed to pay for basic necessities so that he/she can lead a normal life. Zakat can also be distributed to those in financial difficulties e.g. bankruptcy due to the loss of employment and heavy debt. 7. For the cause of God (Fisabillillah) - Zakat can be used to finance any form of struggle or work for the love of God. The following examples fall under this category, e.g. Da'wah; building & developing society's infrastructure; defending Muslims, who are being oppressed; assisting poor travelers and sponsoring a student's educational expenses.

8. Those who are stranded during a journey (Ibnus Sabil) - Zakat can also be used to help a traveler facing difficulties in continuing his journey due to reasons such as loss of money or the breakdown of his vehicles, the repair of which he cannot afford.

5. Define & elaborates the meanings of: Haul

Haul is defined as the completion period for a zakat asset. The length of time for haul is one Islamic or Hijri year (1 year Hijri = 354.5 days, 1 year Solar = 365.25 days). Zakat is only payable on assets that have been held for at least this period. Nisab

It means the minimum amount of property or wealth that must be owned by a Muslim before he/she is obligated for zakat. It is also defined as a measurement that determines the obligation for paying zakah for male or female muslim. To pay zakah, every muslim must note that they have to ensure the balance between debts and owned wealth or properties. Fisabilillah

The word Jihad comes from the root word Jahada, which means to struggle. At the individual level, jihad primarily refers to the inner struggle of being a person of virtue and submission to God in all aspects of life. Wayfarer

The wayfarer is the traveler stranded in a foreign land and is in need of money to achieve his objective or to return to his own country. This person can receive Zakat, if the purpose for traveling is lawful. If the

purpose were unlawful, then he should not receive any moneys from Zakat because it would help him in his sins. Allah Ta'ala warns us, 'Help one another in righteousness and piety, but do not help one another in sin and transgression.' (5:2) Amil

Amil are defined as those who are assigned to perform all the activities with regard to zakat matters, from the collection up to distribution stages. They are divided into two basic units, which are zakat collection unit and zakat distribution unit. And they are paid with money from zakat. So, zakat has a certain amounts that are budgeted to pay the salary of the amil.