A number of questions have been asked and concerns raised by various persons through emails, WhatsApp and in personal conversations with regard to practical aspects of conceptualisation and computation of Zakat. Most of these persons are young professionals and businessmen. It is heartening that more and more individuals are becoming serious about this aspect of their religious obligations. These modern educated individuals are not conversant, and so not at ease, with the terminologies and parlances used by our traditional religious scholars. Further, they need justification and go beyond ‘how’ to ‘why.’ Replies have been provided to concerned persons through the modes they approached. We were cautious to assure that the replies should be in line with the majority opinions of our religious scholars and have been contacting Maulana (Dr.) Raziul Islam Nadvi as the resource person for the purpose. We intend to discuss such concerns and related opinions for general interest in the following lines.
DATE OF COMPUTATION
A businessman feels it would be easier if the date of computation of Zakat coincides with the date of closing of books of accounts because all formalities including valuation of stock have to be done for the closing of the books of accounts. The books of accounts, in India, are legally required to be closed on 31st March every year. Zakat becomes due and payable at the close of twelve lunar months, i.e. one Islamic calendar. Lunar year is shorter than solar year and this difference becomes a full year after 36 years. It is interesting to note that Islam uses both the lunar and solar system of years for its prayers (ibadat). Timings of daily prayers like salat (namaz) and saum (fasting) depend on movements of the sun whereas annual ritual of prayers like beginning and end of the month of saum, incidence of zakat and haj are related with the sighting of the moon.
As regards formalities of closing of books of accounts, computation of zakat would not require full accounts closing activities. Mere ascertainment of current assets (including investments in shares of other businesses) and current liabilities (including provisions of doubtful debts which are unlikely to be recovered) are needed. However, valuation of stock of goods shall have to be done on current market price, as against the principle of “market-price or cost-price whichever is lower” required to be followed in accounts.
PLACE OF VALUATION OF JEWELLERY
A software professional is currently working in America with his family. His company in India has placed him on a project there. He asked about the valuation of the gold ornaments of his wife: whether those have to be valued at the rate in America or the rate in his home-town in India. Further, he wants to know about the disbursement of zakat. Can he utilise that for needy persons in India or he has to utilise the full amount for those in his present place of residence?
Zakat in this case may be computed on the basis of rate prevalent in his home-town because his stay in America is temporary. In the case of those persons who have shifted for good to any other place all rules (ahkam) of Shari’ah like qurbani and zakat for the new place of residence would apply. Further, it is preferable for him to utilise the zakat for needs of the people of his home-town. However, he can use a portion of zakat for needy persons in his present locality. His choice of disbursement of zakat is not restricted.
ZAKAT ON PROVIDENT FUND
There appears to be a difference of opinion regarding inclusion of the amount accumulated in provident funds for computation of zakat. One opinion is that it should be included every year. Another opinion is that it need not be considered every year for the purpose. At the end of the scheme proceed will inflate the income of the individual and zakat will be payable that year if any amount remains unutilised on the date of its computation. There is need to understand different types of provident funds and the rulings with their regards.
In India we have three types of provident funds: General Provident Fund (GPF), Public Provident Fund (PPF) and Employees Provident Fund (EPF). GPF is meant for government servants. PPF can be opted for investment by any individual including those having business or other income. EPF is available to salaried people of organised sectors. In a contributory scheme employer too deposits matching amount whereas he does not do so in a non-contributory fund. The participation of an employee in a provident fund scheme can be either mandatory or voluntary. At times, employees voluntarily opt for higher contribution than what is legally required by law.
Majority opinion of Ulema (theologians) and Fuqaha (jurists) is that compulsory deduction of provident fund and the matching contribution of employers need not be included every year for calculation of zakat. However, if an individual invests voluntarily in any provident fund scheme then this is to be included for the purpose. Contributions in GPF and EPF are mandatory for government and organised sector employees respectively. Further, employees can opt for additional deductions from their salaries. Contributions in PPF is fully voluntary. The logic of excluding mandatory deduction is understandable. It is compulsory and is not in the possession of the employees concerned. Even if they want to withdraw any amount during their service period, they get loans from the account which have to be refunded. The fund becomes a property of the employee only on cessation of his employment.