Islamic Financial Planning

1. ISLAMIC
FINANCIAL PLANNING
Mahyuddin Khalid
Zakat Planning

2. Chapter Outline
Content
Recipient of Zakat
Legal Evidences
Types of Zakat
• Zakat on Income
• Zakat on Savings
• Zakat on Business
• Zakat on Gold
• Zakat on Silver
• Zakat on Share/Investments
• Zakat on Employees Provident Fund (EPF)
Importance of Zakat
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3. Introduction
 Zakat is a payment of a percentage of a Muslim’s
income/properties to an authorized zakat institution
through a zakat collector (‘amil) for distribution to other
needed Muslim as specified by the shariah.
It is one of the five pillars of Islam and therefore is
obligatory (mandatory) to all Muslim.
Zakat payment can be seen spiritually as wealth
purification, not found in conventional personal financial
planning.
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4. Introduction
One of the most important principles of Islam is that all
things belong to Allah S.W.T, and the wealth is therefore
held by human beings in trust.
Zakat means both ‘purification’ and ‘growth’.
Our possessions are purified by setting aside a proportion
for those in need.
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5. Zakat Recipient
Fakir • People do not have anything, so they are in need of asking others for food and clothing
Poor • These people may have money, but it is not sufficient for their basic needs)
Amil • Persons that the authority employs to collect the zakat)
Muallaf • To attract the people who embraced Islam.
Riqab • Freeing captives/slaves
Gharimin
• Debtors are those people burdened by debts because of personal needs or social
necessity
Fisabilillah
IbnSabil
• The traveler stranded in a foreign land and is in need of money to achieve his objective
or return to his own country
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6. When Is Zakat Due?
Passage of One Lunar Year:
 Zakat is obligatory after a time span of one lunar year passes with
the money in the control of it’s owner. Then the owner needs to
pay 2.5% (or 1/4) of the money as Zakat (a lunar year is
approximately 355 days).
Deduction of Debts:
 The owner should deduct any amount of money he or she
borrowed from others; then check if the rest reaches the
necessary nisab, then pays Zakat for it.
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7. Type of Zakat
Zakat on Income
Zakat on Savings
Zakat on Business
Zakat on GoldZakat on Silver
Zakat on
Share/Investments
Zakat on Employees
Provident Fund (EPF)
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8. 3 Ways to Calculate Zakat on Income
2.5 % of gross
income per year
After deducting basic
expenditure
After considering
actual expenses to
bear
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9. Zakat on Savings
Savings is defined as amount of money saved in the
savings account, fixed deposits (investment account),
current account, ASB and any other types of savings in a
bank or other savings institutions.
Zakat payable is based on the lowest balance for a period
of one year.
 The balance amount must met the haul and exceeded the nisab
after deducting the interest/dividend except al wadiah account.
If an individual has more than one account, he has to add
up all the lowest balance of each account.
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10. 2 Ways to Calculate Zakat for Business
Income
Growth Model
(Kaedah Model Berkembang)
Based on owner’s equity on the business entity,
sources of financing and profit or losses.
Working Capital
(Kaedah Model Modal Kerja)
Based on the value of current assets minus short-
term obligations plus adjustments.
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11. Zakat on Gold
 Conditions of calculation for zakat on gold:
 Determine the ‘uruf (nisab - minimum amount that is subject to zakat).
 Find the current price of gold per gram.
 The zakat payable for gold is divided into two situations:
 Gold owned as women accessories / adornments / decorations
 Zakat is payable if the amount of gold has exceeded the ‘uruf (nisab amount for
gold if it is for decorations).
 The ‘uruf is the customary usage in an area and for the state of (example)
Selangor the ‘uruf is
 This is a situation where gold is owned or used other than as accessories
such as owning gold in the form of currencies, savings, house accessories,
minerals.
 The nisab amount is 85 gram.
 Zakat payable = total amount of gold owned x current price/value of gold
per gram x 2.5%
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12. Zakat on Silver
Zakat on silver is obligated to be paid regardless of
whether it is worn for accessories or kept as decorations at
home.
The nisab for silver is 595 gram.
Zakat payable = Total amount of silver owned x
current value of silver per gram x 2.5%
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13. Zakat on Shares
Zakat on shares or investment is divided into 2:
 If shares are owned until the end of the haul period and met the
nisab, it will be 2.5% of the lowest value.
 Zakat payable
 No. of shares owned x (current price or purchased price, whichever is lower) x 2.5%
 If shares are traded during the haul period (and met the nisab), it
will be 2.5% of the capital gain.
 Zakat payable
 2.5% x capital gain
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14. Zakat on Employees Provident Fund
(EPF)
The concept is similar to savings but the withdrawal is not
as easy as the bank’s savings account.
Only imposed upon complete ownership which when the
owner make a withdrawal from EPF.
Zakat payable = Amount withdrawn x 2.5 %
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15. Importance of Zakat (Islamic
Perspective)
Purifies the wealth and assets of the people
A certain percentage of wealth is distributed immediately
in the right manner, because the owner no longer has
moral or legal possession of that percentage
If one fails to do so, he is obviously retaining something
that does not belong to himself
The unlawfully retained percentage makes the whole lot
impure and endangered
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16. Mahyuddin Khalid
Zakat Planning
End of Chapter
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