Zakat is a compulsory act of worship that requires Muslims, at or above a certain wealth threshold, to donate a portion of that wealth, typically 2.5%, to those who are eligible.
This threshold is called the Nisab (sometimes also spelled niṣāb).
How much is the Nisab threshold?
The Nisab was set by the Prophet Muhammad (peace be upon him) at a rate equivalent to87.48 grams of gold and 612.36 grams of silver (85 grams of gold and 595 grams of silver according is another opinion).
How much is the Nisab in Pounds Sterling?
In today’s day and age we do not use silver or gold as a monetary exchange so when calculating your Zakat, you need to find out the equivalent of the rates the Prophet (peace be upon him) set but in your local currency.
This can be done by checking the market rate of gold and silver today.
Remember you only pay Zakat if your net assets equal or exceed the Nisab threshold. If you only have gold as an asset, then the Nisab measure for gold must be used. If, however, you have a mixture of assets, then the Nisab level for silver should be used.
Which standard should I use, gold or silver?
Although some scholars still maintain that gold should be used regardless, using silver is safer and more beneficial for the recipients of Zakat. In most cases, this means that if your net assets (income and savings) are above the silver Nisab threshold, you must pay Zakat on the total amount of wealth you own.
Why is there a gold Nisab and a silver Nisab?
There are two standards as opposed to one. The reason for this is that Dinar and Dirham were commonly and interchangeably used in the markets in the Prophetic era. The exchange rate at the time was 1:10, and therefore the Zakat payer ended up paying the same amount in terms of purchasing power in the prophetic era. However, there is a stark difference between the gold and silver Nisab today. Hence, the silver Nisab is commonly suggested as the benchmark for Zakat obligation.
And Allah knows best!
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