Zakah (Charity) is regarded as a type of worship and of self-purification. Zakah is the third Pillar of Islam. There are two types of Zakah that a Muslim must make:
Zakah Fitr is a one off payment that is made once in every Muslim Hijri calendar year at any time during the month of Ramadan. All Muslims are obliged to pay this, regardless of their age, status or wealth. The amount of zakah payable is approximately 3kg of staple food in the relevant country or an amount of money that is equivalent to the price of the food.
Zakah al-Mal is an annual payment based on the amount of wealth owned by a Muslim individual or organization. This payment is obligatory upon any Muslim individual or organization that has completed the requirement of Nisab (minimum taxable amount) and Haul (one Muslim Hijri calendar year). The payment is 2.5% out of the total wealth deemed for zakah. This zakah does not refer to charitable gifts given out of kindness or generosity, but the systematic giving of 2.5% of one's wealth each year to benefit the poor. You can review your wealth and pay this zakah at any time during the year.
The benefits of Zakah, apart from helping the poor, are as follows:
- Obeying God
- Helping a person acknowledge that everything comes from God on loan and that we do not really own anything ourselves
- And since we cannot take anything with us when we die we need not cling to it
- Acknowledging that whether we are rich or poor is God's choice
- So we should help those he has chosen to make poor
- Learning self-discipline
- Freeing oneself from the love of possessions and greed
- Freeing oneself from the love of money
- Freeing oneself from love of oneself
- Behaving honestly
The 2.5% rate only applies to cash, gold and silver, and commercial items that you've held for the last 12 months. There are other rates for farm and mining produce, and for animals.