بِسْمِ اللَّهِ الرَّحْمَٰنِ الرَّحِيمِ

There is a prescribed portion in your wealth which needs to be paid out to the deserving ones. This amount needs to be calculated and paid at regular intervals of time. A certain portion of your wealth that you have saved after expenses does not belong to you. It belongs to Allah and has to be paid to the categories of people prescribed by Allah. We will see the related ayas for calculation and payment of this amount as below;

8:41  وَاعْلَمُوا أَنَّمَا غَنِمْتُم مِّن شَيْءٍ فَأَنَّ لِلَّهِ خُمُسَهُ وَلِلرَّسُولِ وَلِذِي الْقُرْبَىٰ وَالْيَتَامَىٰ وَالْمَسَاكِينِ وَابْنِ السَّبِيلِ إِن كُنتُمْ آمَنتُم بِاللَّهِ وَمَا أَنزَلْنَا عَلَىٰ عَبْدِنَا يَوْمَ الْفُرْقَانِ يَوْمَ الْتَقَى الْجَمْعَانِ ۗ وَاللَّهُ عَلَىٰ كُلِّ شَيْءٍ قَدِيرٌ

And know that whatever ‘Ghanim’ / Profit / Advantage you get from anything, if you believe in Allah then surely ‘One Fifth’ is for Allah and for the Messenger and for the relatives and for the orphans and for the needy (who are reduced to poverty) and for the sons of the way, and whatever We sent down over Our servant on the day of the division, the day when the two accumulations meet. And Allah has power over everything.

‘Ghanim’ means what ever you gain or save. What ever you save after your expenditures, one fifth of this saving is the portion which needs be paid out as ‘Zakat’. The main categories on which this amount to be spent is Allah, Rasool (which means on the propagation of the Deen/Judgement of Allah and Rasool), the orphans, the poor and the sons of the way. This is prescribed to you if you believe in Allah and what has been inspired on His servant on the day of differentiation on which two accumulations meet.

The way to calculate this amount is to establish a period of time and calculate the difference in net worth  from the last time period (This will be the day of differentiation). Calculate the value of current assets (minus liabilities)  and calculate the difference in net worth from last calculation (This is how two accumulations will meet). If you are calculating for the first time, last period’s net worth will be zero.  If there is an increase in net worth, then one fifth of this increase is to be spent on the above mentioned categories.

8:69  فَكُلُوا مِمَّا غَنِمْتُمْ حَلَالًا طَيِّبًا ۚ وَاتَّقُوا اللَّهَ ۚ إِنَّ اللَّهَ غَفُورٌ رَّحِيمٌ

So, enjoy what you have made, lawful and good. but fear Allah. for Allah is Oft-forgiving, Most Merciful.

80% of the savings is for to enjoy, it is halal for you after payment of 20% of the prescribed amount.

59:7  مَّا أَفَاءَ اللَّهُ عَلَىٰ رَسُولِهِ مِنْ أَهْلِ الْقُرَىٰ فَلِلَّهِ وَلِلرَّسُولِ وَلِذِي الْقُرْبَىٰ وَالْيَتَامَىٰ وَالْمَسَاكِينِ وَابْنِ السَّبِيلِ كَيْ لَا يَكُونَ دُولَةً بَيْنَ الْأَغْنِيَاءِ مِنكُمْ ۚ وَمَا آتَاكُمُ الرَّسُولُ فَخُذُوهُ وَمَا نَهَاكُمْ عَنْهُ فَانتَهُوا ۚ وَاتَّقُوا اللَّهَ ۖ إِنَّ اللَّهَ شَدِيدُ الْعِقَابِ

Whatever Allah has bestowed over His messenger from the people of the cities, it is for Allah and for the Messenger and for the relatives and for the orphans and for the needy (who are reduced to poverty) and for the sons of the way, so that the wealth may not circulate only amongst the rich of your people and whatever the Messenger gives you so take it and whatever He forbids you about it, so desist and take guard from Allah. Surely Allah is strong in punishment

Whatever economic system is established in the society the idea of payment of ‘Zakat’ is that wealth does not circulate only between the rich of the society. There should be a way of flow of wealth from the rich who have been bestowed greater capacity to produce wealth, to the poor.

2:280  وَإِن كَانَ ذُو عُسْرَةٍ فَنَظِرَةٌ إِلَىٰ مَيْسَرَةٍ ۚ وَأَن تَصَدَّقُوا خَيْرٌ لَّكُمْ ۖ إِن كُنتُمْ تَعْلَمُونَ

And if he is in difficulty, then respite is given to him towards easiness and that you give SADQA / CHARITY, that is better for you if you would have known.

If you are short of cash or may be most of your assets are not very liquid leaving you short of cash, you may pay the required amount later when you are in a better financial position. However, the amount to be paid will remain in your books

3:180  وَلَا يَحْسَبَنَّ الَّذِينَ يَبْخَلُونَ بِمَا آتَاهُمُ اللَّهُ مِن فَضْلِهِ هُوَ خَيْرًا لَّهُم ۖ بَلْ هُوَ شَرٌّ لَّهُمْ ۖ سَيُطَوَّقُونَ مَا بَخِلُوا بِهِ يَوْمَ الْقِيَامَةِ ۗ وَلِلَّهِ مِيرَاثُ السَّمَاوَاتِ وَالْأَرْضِ ۗ وَاللَّهُ بِمَا تَعْمَلُونَ خَبِيرٌ

And let not reckon those who are stingy with what Allah has given them of His Grace, that it is good for them. Instead, it is worse for them. The things with which they were stingy, will be made a yoke for them on the Day of Judgment. For Allah is the heritage of the heavens and the earth; and Allah is aware of what you do.

If you don’t pay this prescribed amount then this is an increase in your wealth which you have made by usurping Allah’s portion. Al-Riba means, the increase.  Eighty percent remaining portion after payment of Zakat was your lawful portion of wealth to be enjoyed. If you increase your wealth by not paying Zakat then this increase is referred as Ar-Riba and because Allah’s and Rasool prescribed portion in your wealth is usurped by you, Allah and Rasool declare war on those believers who don’t pay this amount;

2:278-9  يَا أَيُّهَا الَّذِينَ آمَنُوا اتَّقُوا اللَّهَ وَذَرُوا مَا بَقِيَ مِنَ الرِّبَا إِن كُنتُم مُّؤْمِنِينَ

فَإِن لَّمْ تَفْعَلُوا فَأْذَنُوا بِحَرْبٍ مِّنَ اللَّهِ وَرَسُولِهِ ۖ وَإِن تُبْتُمْ فَلَكُمْ رُءُوسُ أَمْوَالِكُمْ لَا تَظْلِمُونَ وَلَا تُظْلَمُونَ

O’ you who believe take guard of Allah and leave off, what remains from AR-RIBA / THE INCREASE , if you are believers. Then if you do not, (leave off, what remains from AR-RIBA / THE INCREASE),so take a notice of war from Allah and His messenger. And if you turn back, so for you are the heads of your wealth. You do not oppress and you will not be oppressed.

Please note that this war is declared only on believers  as this instruction is directed towards believers.

2:261  مَّثَلُ الَّذِينَ يُنفِقُونَ أَمْوَالَهُمْ فِي سَبِيلِ اللَّهِ كَمَثَلِ حَبَّةٍ أَنبَتَتْ سَبْعَ سَنَابِلَ فِي كُلِّ سُنبُلَةٍ مِّائَةُ حَبَّةٍ ۗ وَاللَّهُ يُضَاعِفُ لِمَن يَشَاءُ ۗ وَاللَّهُ وَاسِعٌ عَلِيمٌ

The example of those who spend their wealth in the way of Allah is like the example of grain that grows seven ears in every ear is 100 grains. And Allah multiplies for whom He wills. And Allah is All spacious, All knowing

When you will spend in Allah’s way from your portion (not from Allah’s portion which does not belong to you in the first place), Allah puts great barakah/growth in that.

2:273   لِلْفُقَرَاءِ الَّذِينَ أُحْصِرُوا فِي سَبِيلِ اللَّهِ لَا يَسْتَطِيعُونَ ضَرْبًا فِي الْأَرْضِ يَحْسَبُهُمُ الْجَاهِلُ أَغْنِيَاءَ مِنَ التَّعَفُّفِ تَعْرِفُهُم بِسِيمَاهُمْ لَا يَسْأَلُونَ النَّاسَ إِلْحَافًا ۗ وَمَا تُنفِقُوا مِنْ خَيْرٍ فَإِنَّ اللَّهَ بِهِ عَلِيمٌ

It (SADQA / THE CHARITY) is for fuqra / the poor, those who are restricted in the way of Allah, they do not have the means to strike in the earth, the ignorant accounts them as rich from their modesty. You will recognize them with their marks. They do not ask people persistently and whatever you spend from the good then Allah has knowledge of it.

There are people who would not appear poor but they are the needy ones as they do not have the means to strike on earth. They don’t ask people for money. With these traits you should be able to recognize them (that is they don’t have the means to produce money and they don’t ask for money). These people also deserve your charity. Give them in such a way that do not compromise their dignity.

2:219  وَيَسْأَلُونَكَ مَاذَا يُنفِقُونَ قُلِ الْعَفْوَ ۗ كَذَٰلِكَ يُبَيِّنُ اللَّهُ لَكُمُ الْآيَاتِ لَعَلَّكُمْ تَتَفَكَّرُونَ……..’

They ask you concerning what they should spend? Say ‘graciousness/ overlook’ ; likewise Allah clarifies His ayahs/signs to you so that you may ponder.

Be gracious when you spend in the way of Allah. 

17:26-29  وَآتِ ذَا الْقُرْبَىٰ حَقَّهُ وَالْمِسْكِينَ وَابْنَ السَّبِيلِ وَلَا تُبَذِّرْ تَبْذِيرًا  إِنَّ الْمُبَذِّرِينَ كَانُوا إِخْوَانَ الشَّيَاطِينِ ۖ وَكَانَ الشَّيْطَانُ لِرَبِّهِ كَفُورًا  وَإِمَّا تُعْرِضَنَّ عَنْهُمُ ابْتِغَاءَ رَحْمَةٍ مِّن رَّبِّكَ تَرْجُوهَا فَقُل لَّهُمْ قَوْلًا مَّيْسُورًا  وَلَا تَجْعَلْ يَدَكَ مَغْلُولَةً إِلَىٰ عُنُقِكَ وَلَا تَبْسُطْهَا كُلَّ الْبَسْطِ فَتَقْعُدَ مَلُومًا مَّحْسُورًا

And give to the relatives their due rights, and to the poor and to the wayfarer. And do not squander (your wealth) in a wasteful manner. Squanderers are the brothers of the satans, and the satan is to his Lord, a rejecter. And even if you have to turn away from them in pursuit of the grace from your Lord which you expect, you speak to them kindly.  Make not your hand tied (like a niggard’s) to your neck, nor stretch it forth to its utmost reach, so that you become blameworthy and destitute.

We need to give the due share prescribed from our wealth to the categories of people (described earlier), If we have to turn them away due to shortage of means at some point, we need to do so while being kind to them. We are advised to be moderate in our spending not to be stingy and at the same time not be spending so graciously as to become a destitute. 

Notes:

The word for ‘interest’ in Arabic is ‘Faida’, not Riba. Riba means increase.

Further study:

Lecture about Zakat and Riba from Br. Mohammad Shaikh:

https://www.iipccanada.com/category/urdu-video-lectures/maal-ka-istamal/

http://iipctvstream.com/eng_justification.html