Zakat Threshold for Gold: A Comprehensive Practical Guide to Calculation and Disbursement

Understanding the rulings of Zakat on precious metals is a fundamental Islamic obligation for every Muslim who owns gold assets, especially with the increasing reliance on this metal as a safe investment refuge. Zakat in this domain covers all forms of gold, whether in the form of bars, jewelry for saving, or even modern investment tools.

The Sharia Framework for Zakat on Precious Metals

Zakat is one of the five pillars of Islam and an essential obligation for Muslims. Allah the Almighty said: ﴿Establish prayer and give zakat and obey the Messenger that you may receive mercy﴾, emphasizing its great importance.

Zakat on gold is considered one of the most important types of wealth Zakat, as it is linked to one of the oldest known forms of wealth throughout history. Gold was not merely a precious ornament but was regarded as an independent wealth used in trade transactions and savings. Therefore, Sharia has mandated the obligation of Zakat on it once it reaches the Nisab and a full lunar year passes.

The Prophet صلى الله عليه وسلم emphasized this great obligation in his noble hadith: “No owner of gold or silver who does not pay its right but that on the Day of Resurrection, plates of fire will be made for him” (Narrated by Muslim), highlighting the religious and moral importance of this duty.

Determining the Nisab of Zakat on Gold

The legal Nisab represents the minimum ownership threshold that obligates paying Zakat. The Prophet صلى الله عليه وسلم said: “There is no Zakat upon you in gold until you have twenty dinars, and if you have twenty dinars and a year passes over them, then in them is half a dinar” (Narrated by Abu Dawood and Al-Bayhaqi).

Scholars estimated the value of twenty dinars as approximately 85 grams of pure 24-karat gold, which is the primary standard upon which all calculations are based.

###Explanatory table of Nisab according to different purity levels

The weight differences result from varying purity levels; 24-karat gold is 100% pure, 21-karat contains 87.5% pure gold, and 18-karat contains 75%.

###A clarifying table for Nisab based on different gold purities

The Basic Formula for Calculating Due Zakat

Zakat on gold = 2.5% × Market value of pure gold

The process is straightforward: when the owned gold reaches the Nisab and a full lunar year passes, 2.5% of the total market value is paid at the time of Zakat due.

###Practical illustrative examples

Example 1 - 24-karat gold:

A person owns 100 grams of 24-karat gold, with the market price per gram being 400 SAR.

• Actual pure gold: 100 × 1 = 100 grams
• Total value: 100 × 400 = 40,000 SAR
• Zakat due: 40,000 × 2.5% = 1,000 SAR

Example 2 - 21-karat gold:

A person owns 100 grams of 21-karat gold, with the same market price (400 SAR per gram):

• Actual pure gold: 100 × 0.875 = 87.5 grams
• Total value: 87.5 × 400 = 35,000 SAR
• Zakat due: 35,000 × 2.5% = 875 SAR

Example 3 - 18-karat gold:

A person owns 100 grams of 18-karat gold:

• Actual pure gold: 100 × 0.75 = 75 grams
• Total value: 75 × 400 = 30,000 SAR
• Zakat due: 30,000 × 2.5% = 750 SAR

⚠Important note: In the last example, the pure gold weight does not reach the Nisab of 85 grams (, so Zakat is not due on the total weight despite the overall weight.

Types of Gold and Zakat Rulings

Scholars differ in their rulings based on the purpose and use of gold:

) 1. Trade and Investment Gold

If the gold is prepared for sale, trade, or saving with the intention of increasing wealth, Zakat is obligatory according to the consensus of most scholars. This includes bars, gold coins, gold ETFs, and digital investments linked to the precious metal.

Imam An-Nawawi stated that jewelry not used and kept for saving purposes is subject to Zakat. Ibn Qudamah indicated that if the intention shifts from adornment to investment, Zakat becomes obligatory after a full year from the time of the change in intention.

2. Personal Jewelry Gold

There is a disagreement among scholars regarding jewelry used daily for personal adornment such as rings and bracelets. The majority (Malik, Shafi’i, and Ahmad) believe that gold purchased for personal adornment does not have Zakat, treating it like clothing and household items.

However, the Hanafi school considers Zakat obligatory even on used jewelry, citing a hadith in Sunan Abi Dawood. A third opinion among some Malikis states that Zakat on jewelry for adornment is due only once.

3. Men’s Gold

Islam forbade men from wearing gold, as the Prophet صلى الله عليه وسلم said: “Indeed, these two are forbidden for the males of my Ummah” (Narrated by Imam Ahmad), referring to gold and silk. However, this prohibition does not exempt the obligation of Zakat on what they own of this metal, whether in the form of jewelry or otherwise.

Categories of Zakat Recipients

Allah the Almighty specified the eligible categories for Zakat in the verse: ﴿Zakat expenditures are only for the poor, the needy, those employed to collect [Zakat], those whose hearts are to be reconciled, to free captives, those in debt, in the cause of Allah, and for the traveler…﴾ [At-Tawbah: 60].

The Poor: Those who do not possess enough to meet their basic needs of food, clothing, and shelter.

The Needy: Those who have some of their needs but their income or wealth is insufficient.

Zakat Collectors: Officials responsible for collecting and distributing Zakat, who receive a share for their efforts.

Reconciliation of Hearts: Those given to strengthen their faith, ward off evil, or gain their favor for Islam.

In Ransom (Slaves): Supporting those seeking emancipation; in modern times, includes those in harsh conditions.

Debtors: Those burdened with legitimate debts they cannot repay.

In the Cause of Allah: Supporting all that benefits Islam, defending the community, and charitable works.

The Traveler: The stranded traveler who has lost their money and needs to return home.

Categories Not Eligible for Zakat

The Prophet’s family and Banu Hashim: Islam exempts them from Zakat, as the Prophet صلى الله عليه وسلم said: “Indeed, these charities are impurities of people, and it is not lawful for Muhammad or the family of Muhammad” ###Sahih Muslim(.

Able-bodied, lazy workers: Those capable of earning but choose not to, whereas those working and unable to meet their needs are considered eligible.

The wealthy: Those who are self-sufficient through their wealth or income, as the Prophet said: “Charity is not lawful for the rich” )Sahih Abi Dawood(.

Kafir (disbelievers): The majority agree that they should not be given Zakat, but they may receive general charity (Sadaqah).

Those whose expenses are obligatory: Parents, spouses, children, and relatives whose maintenance is legally obligatory are supported from personal wealth, not Zakat.

Rules and Prohibitions for Paying Zakat

To ensure the validity of Zakat payment, Sharia has set important rules:

• Not to pay to non-Muslims except in special cases
• Pay immediately upon due date without delay
• Prohibition of deducting Zakat from old debts; it should be paid from new wealth
• Adherence to the eight designated categories specified in the Quran
• Not to convert Zakat into voluntary charity, as it is an independent act of worship
• Avoid showing off (Riya); it is performed solely for Allah
• Pay the full amount from the Nisab
• Not to pay from unlawful wealth, such as gold mixed with usury (riba)
• Not to favor non-eligible recipients out of courtesy
• Prevent manipulation of the Nisab by reducing weight or price to evade obligation

Modern Gold Investment and Zakat

With the development of financial markets, new investment tools linked to gold have emerged:

Gold ETFs: Treated as direct ownership of gold, Zakat is due at 2.5% of the market value when a lunar year passes.

Mining company shares: Zakat depends on the intention; if for trading, Zakat is on the full market value; if for long-term investment, only the cash profits are Zakatable.

Digital gold accounts: Treated like bars and coins, Zakat must be paid fully if the Nisab is reached.

Benefits of Paying Zakat

Paying Zakat offers great benefits:

• Purification of wealth and increase in barakah: Removes doubts and multiplies blessings in sustenance
• Fostering generosity: Cultivates charity and participation
• Reducing social disparities: Redistributes wealth and promotes justice
• Earning abundant reward: Brings the servant closer to Allah and multiplies good deeds

Zakat on gold is not merely a financial obligation but a means to strengthen social solidarity and purify the soul before wealth.

Frequently Asked Questions

Q: How do I accurately calculate Zakat on gold?

A: First, ensure the gold has reached the Nisab )85 grams of pure gold(, then confirm a full lunar year has passed, then multiply the total weight by the purity percentage and the market price, and pay 2.5% of the result.

Q: What is the Nisab of Zakat for 21-karat gold?

A: The Nisab for 21-karat gold is approximately 97 grams, since its purity is 87.5%.

Q: When does the Zakat period become due?

A: Zakat becomes obligatory when two conditions are met: reaching the Nisab )85 grams of pure gold( and completing a full lunar year of ownership.

Q: Is Zakat due on gold investment funds?

A: Yes, if the funds are backed by actual gold )ETFs(, Zakat at 2.5% of the market value is due when the Nisab is reached.

Q: How are gold investment profits calculated?

A: For physical gold and funds backed by it, evaluate the total value )original + profits( at market price and pay 2.5% if the Nisab is reached. For mining stocks, only the realized cash profits are Zakatable.

Summary

The Nisab of Zakat on gold starts from 85 grams of pure gold, and Zakat at 2.5% of the market value is due when a full lunar year passes. The obligation covers all forms of gold, from bars and jewelry for saving to modern investments. Different types have different rulings based on intention and use, and Zakat is allocated to the eight categories specified in Sharia. Complying with this obligation promotes social solidarity, purifies wealth from doubts, and increases blessings in sustenance.