Zakat on Gold, Silver, and Cash

Zakat on gold, silver, and their monetary equivalents (cash, bank accounts, investments) is the most commonly applicable form of zakat for Muslims today. The obligation is established in the Quran: "And those who hoard gold and silver and do not spend them in the way of Allah, give them tidings of a painful punishment" (Quran 9:34). The Prophet (peace be upon him) provided specific thresholds and rates that form the basis of zakat calculation on monetary wealth.

The Nisab Thresholds

The nisab is the minimum amount of wealth above which zakat becomes obligatory. For gold, the nisab is 20 mithqals, equivalent to approximately 85 grams (about 3 troy ounces). For silver, the nisab is 200 dirhams, equivalent to approximately 595 grams (about 21 troy ounces). These thresholds are established in authentic hadith. For cash and monetary assets, scholars use the equivalent value of either gold or silver. There is a significant scholarly discussion about which standard to use, since the gold and silver nisab thresholds produce very different cash amounts in the modern economy.

Gold vs. Silver Standard for Cash

The silver nisab is significantly lower than the gold nisab in modern currency. For example, if gold is priced at $2,000 per ounce, the gold nisab would be approximately $5,700. If silver is at $25 per ounce, the silver nisab would be approximately $540. The Hanafi school generally uses the silver standard, as it results in more people being obligated to pay zakat and more wealth being redistributed to the poor. Many contemporary scholars and fatwa councils also prefer the silver standard for this reason. However, some scholars argue for the gold standard as more stable and reflective of genuine wealth.

Calculation Method

Once wealth exceeds the nisab and a full lunar year (hawl) has passed, the rate is 2.5% (one-fortieth) of the total zakatable wealth. Zakatable monetary wealth includes: cash in hand and bank accounts, gold and silver jewelry (the Hanafi school requires zakat on all gold and silver jewelry; the Shafi'i and Hanbali schools exempt jewelry in regular personal use), stocks and investments at market value, trade goods at market value, and receivable debts expected to be repaid. Deductible from this total are personal debts due within the year and basic living expenses.

Practical Example

Consider a person who, on their zakat due date, has: $15,000 in savings, $5,000 in a checking account, gold jewelry worth $3,000, stocks worth $10,000, and owes $8,000 in debts due within the year. Their zakatable assets total $33,000 minus $8,000 in debts, equaling $25,000. The zakat due would be 2.5% of $25,000, which is $625. This should be distributed to the eight categories of eligible recipients specified in Quran 9:60. It is recommended to pay zakat promptly upon its due date and to prioritize local recipients before sending it abroad.