Zakat
An obligatory annual contribution on qualifying wealth above a minimum threshold, paid to specified categories of recipients.
Zakat is an obligatory financial contribution prescribed by Shariah on those who hold wealth above a minimum amount, the nisab, for one lunar year, and it is disbursed to specified recipients. IFSB-26 uses this definition. Which assets are zakatable, how they are valued and how the base is calculated for individuals and companies are addressed in AAOIFI's Shariah standard on zakah and its accounting standards on zakah.
Sources
This entry explains a term; it is not a Shariah ruling. Approving a product is for each institution's own Shariah board and regulator.
Related terms
NisabThe minimum amount of wealth above which zakat becomes due; for money it is set by reference to gold or silver.HawlThe full lunar year for which qualifying wealth must be held above the nisab before zakat becomes due on it.Zakat recipients (asnaf)The categories of people and purposes to which zakat may be paid, as set out in the Quran.Zakat baseThe pool of qualifying wealth on which zakat is calculated, after including zakatable assets and deducting what the method allows.SadaqahVoluntary charity given to people in need, beyond the obligatory zakat.