Zakat on Income in Islam

Islamic ruling: Salary and wages are the most common income type. In Islam, when you receive your monthly or weekly paycheck, it becomes part of your total wealth. You do not calculate Zakat immediately. Instead, you wait until your annual Zakat date, total all accumulated salary savings along with other assets, and pay 2.5% Zakat if above nisab.

Practical application: If you earn $5,000 monthly and save $1,000 per month, after 12 months you have $12,000 saved. On your Zakat date, you include this $12,000 in your total zakatable wealth calculation. The Islamic method is annual calculation, not monthly. See our Zakat on Salary guide for complete details.

Common misconception: Many believe Zakat on salary income in Islam must be paid monthly. This is incorrect. Monthly income does not mean monthly Zakat. Read our Zakat on Monthly Salary guide to understand why.

Islamic ruling: Business income in Islam includes profits from trade, sales, services, and commercial activities. Business owners must calculate Zakat on total business wealth, which includes inventory, cash, accounts receivable, minus accounts payable. Business income that remains as business assets is subject to Zakat when above nisab for hawl.

Practical application: On your annual Zakat date, value your current inventory at cost or market price (whichever is lower), add business bank accounts, add money owed to you that you expect to collect, subtract money you owe to suppliers, and pay 2.5% Zakat on the net total if above nisab.

Key distinction: Business Zakat in Islam is on wealth tied up in the business, not just on profit withdrawn. Even if you reinvest all profits back into inventory and growth, Zakat is still due on the total business wealth annually.

Islamic ruling: Agricultural income in Islam has unique rules. Zakat on crops and produce is due at harvest time, not subject to the one year hawl requirement. The rate depends on irrigation method. If watered naturally by rain or rivers without significant cost, Zakat is 10% of the produce. If watered artificially with pumps or purchased water requiring effort and expense, Zakat is 5% of the produce.

Practical application: A farmer harvests wheat worth $10,000. If rain watered the crops, he pays $1,000 Zakat (10%). If he used irrigation systems with ongoing costs, he pays $500 Zakat (5%). This Zakat is due immediately at harvest, separate from other Zakat on accumulated wealth.

Nisab for agriculture: The nisab for agricultural produce in Islam is 5 wasq, equivalent to approximately 653 kilograms or 1,440 pounds of produce. Below this threshold, no agricultural Zakat is due.

Islamic ruling: Rental income in Islam is treated like salary. The rental property itself (house, apartment, commercial building) is not zakatable wealth. However, the rental payments you receive become part of your total wealth. Accumulated rental income that remains above nisab for one lunar year is subject to 2.5% Zakat.

Practical application: You own a rental property generating $2,000 monthly. The property building is not zakatable. But the $24,000 you collect annually and save becomes part of your zakatable wealth. On your Zakat date, include accumulated rental income in your total wealth calculation.

Important note: If you immediately spend rental income on property maintenance, mortgage payments, or personal expenses, and no savings accumulate above nisab for hawl, no Zakat is due on that rental income in Islam.

Islamic ruling: Investment income in Islam includes dividends, capital gains, profit distributions, and any returns from stocks, funds, or business investments. Both the investment principal and accumulated returns are zakatable. You calculate Zakat on the total current market value of investments plus any uninvested income on your annual Zakat date.

Practical application: You own $20,000 in stocks that paid $1,500 dividends during the year. You also have unrealized capital gains. On your Zakat date, the stocks are worth $23,000 and you have $1,500 cash from dividends. Total zakatable amount is $24,500. Zakat due is $612.50 (2.5%). See our Zakat on Investments guide.

Cryptocurrency income: Crypto gains and income follow the same rule in Islam. Include current market value of holdings plus any realized gains in your annual calculation. Our Crypto Zakat guide covers this thoroughly.

Islamic ruling: Freelance income, consulting fees, professional services income, and irregular earnings all follow the same Zakat principles in Islam. Income accumulates into your total wealth. You calculate Zakat once annually on all accumulated wealth from all income sources combined when above nisab for hawl.

Practical application: A freelance consultant earns varying amounts monthly, anywhere from $3,000 to $15,000. By the end of the year, total accumulated savings from freelance work is $50,000. On the Zakat date, this $50,000 is included in total zakatable wealth calculation along with other assets.

Irregular income consideration: Income irregularity does not change Zakat calculation in Islam. Whether income is predictable or unpredictable, the method remains the same: annual calculation on total accumulated wealth. Hawl begins when accumulated wealth first crosses nisab.

Scenario: You have salary from employment ($60,000 annually), rental income from a property ($15,000 annually), and freelance consulting work ($20,000 annually). Total income is $95,000 per year from three different sources.

Islamic ruling: All income sources are combined in Islam. On your Zakat date, you do not calculate separate Zakat for each income type. Instead, you total all accumulated wealth from all three sources plus any other assets, and calculate one Zakat amount on the combined total if above nisab.

Calculation: If you saved $25,000 from salary, $10,000 from rentals, and $15,000 from freelancing, your total accumulated wealth from income is $50,000. Add other zakatable assets, then calculate 2.5% Zakat on the grand total in Islam.

Scenario: You recently converted to Islam or just started earning significant income for the first time. Your wealth from income recently crossed nisab. When does your Zakat obligation begin?

Islamic ruling: Your hawl (one lunar year) begins the moment your total zakatable wealth first reaches nisab. Mark this date on the Islamic calendar. One full lunar year later, calculate Zakat on whatever wealth you have at that moment if still above nisab. This starts your annual Zakat cycle in Islam.

Example: You crossed nisab on 15 Muharram 1446. Your first Zakat date is 15 Muharram 1447. On that date, calculate Zakat on all accumulated wealth from income and other sources. Then repeat annually on 15 Muharram according to Islamic law.

Scenario: You earn income in a foreign currency like Euros, British Pounds, or UAE Dirhams, but live in a different country. How do you calculate Zakat on income in Islam when currencies are involved?

Islamic ruling: Convert all wealth to one consistent currency on your Zakat date for calculation in Islam. Use the current exchange rate on that specific day. Whether you convert to your local currency or keep it in the earning currency does not matter, what matters is accurate valuation at the time of Zakat calculation.

Practical approach: If you live in the USA, earn some income in Euros, and some in USD, convert everything to USD on your Zakat date using that day's exchange rate, total the amounts, and calculate Zakat in USD. See our country specific calculators: USA, UK, UAE.

Scenario: You contribute to retirement accounts like 401k, IRA, pension plans, or similar investment vehicles. This money comes from your income. Is there Zakat on retirement income in Islam?

Islamic ruling: Scholars differ on retirement accounts. The majority opinion is that if you have full access and control over the funds, it is zakatable wealth in Islam even if penalties apply for early withdrawal. If the funds are completely inaccessible until retirement age by law or contract, some scholars say no Zakat is due until you can access it.

Conservative approach: Many Muslims calculate Zakat on retirement account balances annually to ensure their obligation is fulfilled in Islam, even though access is restricted. This represents the cautious position. Consult your local Islamic authority if your retirement situation is complex or if you prefer the alternative opinion.