Zakat

Personal Finance

Zakat is a mandatory annual charitable contribution of 2.5% of accumulated wealth above the nisab threshold (approximately Rs 5.5 lakh in gold equivalent in 2025). One of the five pillars of Islam, relevant for Muslim investors managing finances under Islamic principles.

In detail

Nisab: 87.5 grams of gold (approximately Rs 5.5L) or 612.5 grams of silver. Zakat applies to wealth held above nisab for one full lunar year. Applicable on: cash, savings accounts, gold/silver, business inventory, receivables, equity shares (at market value per most scholars). Not applicable on primary residence, personal use items, vehicles.

Formula

Zakat payable = 2.5% x (Total zakatable wealth - Nisab) Zakatable: cash + gold + silver + business inventory + shares Non-zakatable: primary home + personal belongings + vehicles

Real-life example

🇮🇳 India example

Ahmed: Rs 8L savings + Rs 2L gold + Rs 50K silver + Rs 3L equity shares = Rs 13.5L total. Nisab = Rs 5.5L. Zakat-liable = Rs 8L. Zakat payable = Rs 8L x 2.5% = Rs 20,000.

Frequently asked questions

Is there Islamic banking in India? ▼
Formal Islamic banking is not yet approved by RBI for scheduled commercial banks. Some NBFCs and cooperative banks operate on Sharia-compliant principles in certain states. Many Indian Muslim investors calculate Zakat on conventional investments and work with scholars on interpretation.