THE RELIGIOUS TAXES (Khums and Zakat)
Khums and Zakat are, like salah and saum, acts of worship which are obligatory on all Muslims.
Khums is the one-fifth tax, which all adult Muslims who are financially secure and have surplus in their income normally have to pay on annual savings, not commercial profits, and all moveable and immoveable property which is not commensurable with the need and status of the person. Zakat is a tax which must be paid on certain kinds of agriculture produce and livestock, and on gold and silver.
These are not mere taxes, but acts of worship. Just as prayer is an act of worship which involves the performance of certain acts and recitations, and fasting involves physical hardship, thirst, and hunger, these two acts can also be seen in terms of their own kind of expenditure. A Muslim should hold neither life nor wealth dearer than, the pleasure of God; salah and sawm symbolize life, while khums and zakat signify wealth. Moreover, these are not voluntary acts of charity but obligatory duties.
The Qur’an has emphasized that one cannot hope to gain spiritual perfection and the pleasure of God unless one expands one’s wealth for the needy and for the religion (see Qur’an: 31:2-4, 24:56).
The Qur’an also says that these acts of worship were also prescribed by the former prophets (see Qur’an: 21:73, 19:55, 2:43, 5:12, 4:77, 22:41, 7:156, 19:31, and 22:78). God condemns those who do not give their dues, who … Give no zakat and deny the Hereafter (41:7); If… God forgives you, establish regular prayers and pay the Zakat, and obey God and His Messenger (58:13); God calls it a loan to our lord: lend to God a good loan (73:20).
The Function and Purpose of the Religious Taxes
Zakat means ‘something which purifies’. These two religious taxes purify the individual from selfishness and greed, as well as purifying wealth itself by making those less fortunate share in a portion of it. By paying the religious taxes a person demonstrates the belief that wealth is a means and cricumstn not an end in itself; the ultimate end is to gain the pleasure of the Lord.
According to Islam all wealth and sovereignty belong to God. God entrusts it to us in order to test whether we can act responsibility and with piety, or whether we will forget our true circumstances and be dominated by our egos. The first and foremost purpose of khums and Zakat is to profess our loyalty to our Master. At every moment of our life, our health and well being are His gift to us. If God does not gives us these things, we have no power and no right to claim them for ourselves. Thus we should not forget to give thanks. Khums and Zakat are tokens of our thanksgiving to the Lord. That is how an act of expenditure becomes an act of worship.
The second important purpose of khums and zakat is to help the less fortunate selections of the community and to achieve a relatively equitable distribution of wealth in society. In an Islamic society all must live together as brothers and sisters and share their wealth. Every member of society should have the means to live. If one section lacks it, it is the duty of the others to support them and get them to stand on their own two feet.
Zakat and khums are institutions which save society from the evils of poverty as well as of plenty. They ease social tensions, and generate brotherly feelings between the rich and poor.
The One-Fifth Tax (Khums)
Khums is one of the major religious obligations of a Muslim. God instituted it also as a token of regard for the Prophet Muhammad and his family (PBUH). It has been repeatedly stated in the traditions of the Imam Ja’far al-Sadiq (a.s) and the other Imams from the Prophet’s Family that one who does not pay this religious tax has in fact usurped a share belonging to the Prophet’s family(1). The institution of khums has played a very important role in the sustenance of Islamic society and the independence of the ulema from the influence of governments.
Items on which Khums is Payable
A Muslim must pay khums on the following items:
- surplus income,
- lawful wealth or property which is mixed with unlawful,
- riches obtained from mines,
- riches found as treasure,
- riches found through diving in the sea,
- booty obtained in holy war,
- lands a dhimmi buys from a Muslim.
Precepts Regarding Khums on Surplus Income
Khums is payable on all kinds of earnings-income from commerce, industry, and agriculture, wages, net profit from business, and increase in capital-at the end of the year after deduction of household and commercial expenses.
A person normally has to pay khums at the end of the year on all liquid assets, items of clothing bought that year but unused, unconsumed food, and all those household items which are not considered necessities of life for people of that person’s status.
Khums is also payable on gifts, prizes, legacies, anything bequeathed in a will, and sadaqa, but only on amounts left after annual expenses have been deducted. Similarly if a person knows that khums has not been paid on the legacy by the deceased, or if he knows that the deceased owned taxable property, he has to pay khums on the legacy as a debt, which must be paid from it. When a person inherits from a distant relative from whom he would not have inherited in normal conditions, it is an obligatory precaution that he should pay khums on it, but only after annual expenses have been deducted.
No Khums is payable on a dower. There is no khums on the earning or property of a child who has not reached puberty.
Definition of household expenses : Household expenses include food, drink, accommodation, transport, medical expenses, the marriage expenses of a man and his dependents, government taxes, insurance premiums, the amount deducted from a salary for mandatory provident and pension funds, debt repayment, legal fees, the wages of servants, gifts, donations, sadaqa, the expenses of the hajj, umra, and ziyarat,etc.
In the payment of debts only those resulting from essential needs may be included, not those incurred for improving a business. Life-insurance premiums cannot be counted as expenses, but is a kind of saving, although the premiums paid for other kinds of insurance are to be counted among household expenses.
Necessary expenditure is determined according to a person’s status. For example, when a person who might be expected to posses a car buys one, it is included among his necessary expenditures. But if someone belongs to a category of society in which he would not be expected to posses such an item, it would be considered a luxury and would be liable to khums. The jewellery of a woman which is in accordance with her status and which she buys for her personal use is included among necessary expenses.
A person who needs a house can buy it in instalments or stages. but if he saves money each year for a house, that money is not exempt from Khums. After deduction of all such necessary yearly expenses, khums must be given upon all savings from one’s earnings, even if those savings have been made through frugality and being thrifty.
A person who has no personal expenses because they are paid by someone else, should pay khums on all his earnings.
Precepts regarding business
Those who earn through commerce or industry should pay khums on the surplus of their gross income and on the increase in their capital after deducting necessary household and commercial expenses.
Capital is not included as necessary annual expenditure, and Khums must be paid on it. However, if it is necessary to invest the entire capital in order to earn in accordance with one’s status, it is exempt from khums. If at the end of the year some of the capital which has increased is in the bank or with people from whom the owner is sure to obtain it whenever it is wanted, Khums should be paid on the increased capital, but it does not have to be paid on the amount which is in the hands of the other people where it may not be obtainable on demand; it is payable only when it is received.
If a businessman trades in several types of goods but the capital and the accounts are in the same name, as in the case, say, of a supermarket, he can adjust the loss of one section against the profit from another before paying the khums. If a business establishment has several international branches which maintain different accounts and operate under different names for the sake of convenience, smooth functioning, and local tax regulations, when in fact all of them are under the control of single parent-body which compensates for individual losses and adjusts their profits, it is possible to regard them as one company and adjust the loss of one against the profit of the other.
If a person has a different business such as commerce and agriculture, or banking and shipping, and losses occur in one business, he should, as a necessary precaution, not compensate for the profit of one with the loss of other before paying the khums.
If one is a partner in a business and one of the other partners does not pay his khums, there is no harm in becoming his partner in trade our business.
When the price of the commodity soars but the trader does and sell it, in the hope that the price will further increase, if it decreases before the end of the year there will be no khums payable on that increase, but if the commodity holds its value until the end of the year, khums will be payable in accordance with the higher price.
Before paying khums on the profits, the businessman should deduct his commercial expenses.
Definition of Commercial expenses: Commercial expenses include all expenditure by way of business, wages or salaries of employees and consultants, rent, insurance premiums, taxes, fees, licenses, expenditure on the purchase of machinery and its maintenance, transport, bank charges, etc. Destruction of goods is included in commercial expenditure.
If trade is restricted to one commodity, one is allowed to compensate for the destroyed goods from the profit before calculating the income on which khums is liable. However, if a businessman has diversified his trade and he loss occurs in the goods of one business, it is better he should not compensate for the other though he is allowed to do so.
Loss of capital can also be compensated for before deducting khums if has occurred in the same year. However, if there is a deficit in one year, then profit in the next, the loss of the previous year cannot be made up from the next year’s profit, if a person has no profit and borrows for his expenses, he can pay back the debts of his previous year from the profit of this year.
If a person loses a part of his capital in business, but still manages to make a profit from the remaining capital, he has to pay Khums on the profits and cannot deduct the lost of capital through them. However, if he cannot carry out his business without making up for the lost capital, or cannot manage his yearly expenditure without further investment, he can deduct the earlier loss of the capital from his later profit.
Khums on Lawful Wealth mixed with Unlawful
If one has legitimate and lawful wealth or property which is mixed with wealth or property which has been acquired through unlawful means, it is necessary to pay one-fifth of the amount as Khums if neither the amount nor the real owner of the unlawful wealth or property is known, and the remainder of the property will become lawful.
‘Unlawful’ means any wealth acquired by means not permitted in the sharia, or any wealth whose real owner is someone else. ‘Mixed’ means that the owner cannot distinguish the amount or the items which have come into his possession by lawful means from those which he acquired by unlawful means, if a person knows the amount which is not his, but does not know the real owner of that amount, he should give it as alms to the poor on behalf of its owner. If he knows the owner, but does not know the exact amount of the property, which is not his, he, has to come to an understanding with the owner, otherwise they must refer the case to the arbitration of a legal authority.
Khums on Mining
It is obligatory to pay Khums on anything which is mined-gold, silver, copper, iron, petroleum, coal, precious stones, salt, etc.- if it reaches a certain quantity, and this applies to both deep and surface mining. Chalk, lime, and one or two other substances are not counted as minerals.
The threshold for a mineral is 70gms of coined gold, i.e. if the value of a thing which is extracted from a mine reaches that of 70gms of coined gold, the person concerned should pay KHUMS on it after having deducted the expenses incurred in connection with it.
Even if more than one person obtains something from a mine, once it reaches the threshold it becomes liable to KHUMS. But if it is less than the threshold, Khums will only have to paid if the earning from it exceeds the yearly expenditure.
Khums on Treasure
Khums must be paid on treasure-trove when it is in the from of gold or silver currency, and when it amounts to more in value than 70gms of coined gold or 484gms of coined silver. On other items Khums may be paid only as a recommended precaution. Treasure- trove belongs to the owner of the land on which it was found; if the land has no owner, it becomes the property of the one who unearthed it.
Khums on Riches from the Sea
Khums must be paid on riches- pearls, coral, gems- acquired by diving in the sea, in a large river,or in any deep water, provided that they are naturally found in these places. If the are found on the shore, Khums is not payable. As matter of precaution, there is not threshold.
Khums is not payable on fish and other animals, which are caught without diving; however, if the income for the fisherman from this source alone, or combined with other profits made by him, exceeds his expense for one year, Khums become payable on the surplus.
Precepts regarding the expenditure of khums
Khums is divided into two equal shares: the share of the Imam (sahm-e- imam) and the share of the sayyids (sahm-e-sadat). The share of the Imam is to be paid to the living Imam, and in the period of the occultation (ghaybat) to the most learned authority of the time and to the one whom the giver follows in taqlid. If a person wants to pay this portion of the khums to someone other than his marja, he or she should seek permission from him. The share of Imam is used for those purpose which are deemed appropriate for the promotion of Islam and the improvement of the condition the Muslims. The other half of the khums, the share of the sayyids, is to be given to needy sayyids who lack the resources for one years respectable living (in accordance with their various statuses). It can also be given to poor, orphaned sayyids. The sayyid to whom the khums is given must be a twelver Shi’a. Although it is not necessary that one who receives the khums should be a person of probity, he should not be among those who were reputed sinners or who openly obtain from praying.
As a necessary precaution, each sayyid should be given only that amount which will suffice for one year’s expenses (according to his status) and no more. It is necessary to verify whether a person is sayyid or not be fore giving him a part of the khums. The claim to be sayyid is not enough either two persons of probity should attest to it, or be he should be reputed among people to be a sayyid.
If there are needy sayyids in one’s own locality, it is preferable to pay them first. However, if there are not enough deserving persons in one’s locality, one can also distribute the khums in other localities.
One should not pay the khums to those sayyids whom the giver has to support as an obligation, but it can be paid to other relatives and friends. Khums can also be given to those sayyids who are travelling and need help, though they may be prosperous in their own localities. However , it can not be given to travellers who have embarked on a journey for some unlawful or immoral purposes.
The alms tax (Zaqat)
Zakat is an obligatory tax due on certain quantities of specified items. These are:
- sheep and goats,
The threshold above which zakat becomes payable on these items, and the amount which is not to be paid, can be found in the fatwas of the mujtahid.
The expenditure of zakat
Zakat may be used for the following purposes.
- It may be given to the needy and the poor: a needy person is one who is unable to meet his or her annual expenditure, depending on status; the poor live below this level of need.
- It may be given to the Imam or his deputy, and to persons appointed by them as their agents for this purpose.
- It may be given to non- Muslims who may be attracted towards Islam, or whom it is in the interest of Islam to win over.
- It may be given to a traveller who is in difficulty.
- It may be given to a person who is having difficulty repaying debts.
- It may be spent on anything which van be considered in the cause of god, e.g. building of mosque or a school, improving roads, etc.
The recipients of zakat (except those in the third category) must be twelver Shi’ is who are not in famous sinners and who are not supported by the persons paying the zakat. The obligatory zakat of the non- sayyid should not be given to sayyids unless they in dire need and what they have been given from khums (sahm-e- sadat etc.) is not sufficient for them.