Everything You Need to Know About Zakat in Malaysia

How do you pay? How much? Are you qualified for it? We address all the questions you always wanted answers to but are too afraid to ask!

What is Zakat in Islam?

Zakat or tithe is a payment that must be fulfilled by Muslims all over the world. The purpose is to assist the less fortunate, as all of the collected payments will be distributed to different channels and handed to those who need it most.

Under the Syariah Criminal Enactment Law of each state, Muslims in Malaysia could actually serve jail time or be forced to pay a hefty fine for skipping their zakat payment on purpose. Here's a rundown on the basics of paying zakat in Malaysia.


There Are 2 Types of Zakat:

1. Zakat Fitrah

There are two major types of zakat; Zakat Fitrah and Zakat Harta. Zakat Fitrah is a small levy imposed on each Muslim and must be paid every year without fail, regardless of age, income, or wealth. Usually, Muslims settle their Zakat Fitrah during the Ramadhan (or fasting) month every year.

The fee is nominal and costs less than RM10. But just how much is it in your state? It all depends on the price of rice grains (one pack is equivalent to 2.7kg)! Allow us to elucidate; in the olden days, Zakat Fitrah was not paid using money. Rather, people pay with a food staple, and in our case: rice grains. These were then distributed to the poor. Now, the cost of grains in each state varies from RM4.50 to RM8.00.

2. Zakat Harta

The second type is Zakat Harta. Zakat Harta is divided into several categories: zakat on earnings, Zakat on Business, Zakat on Savings, Zakat on Gold & Silver, Zakat on KWSP / EPF, Zakat on Farming, and Zakat on Livestock. The most relevant type of Zakat Harta for Malaysians would be the zakat on earnings, simply because if they have been employed for more than a year and rewarded an income that's above the required amount, they are then obliged to perform their zakat on earnings.

Unlike Zakat Fitrah, zakat on earnings is not mandatory to all. Just like our income tax, it is essential only after a persons wealth has reached a certain amount. This amount is called nisab. In general, the nisab for zakat on earnings is equivalent to the price of 85 grams of gold and differs according to the state.

As the name suggests, zakat on earnings is calculated from a persons earnings (much like the income tax). Generally, all Muslims are mandated to give 2.5% of their income. So for example, if the 'earnings' (the wealth, income, and other items that are included in the calculation) for the year is RM20,000 (more than the nisab amount), 2.5% of that is the zakat amount (RM20,000 x 2.5% = RM500). The types of earnings included are such as a persons salary, any freelance or professional services, and income from rental.


Zakat's Reliefs and Rebates

Zakat has its own reliefs and rebates that allow the payer to deduct certain items from the calculation. This deduction is called Had Kifayah (the minimum limit of income adequacy for an individual or a family) and the amount for each item is determined by each states Islamic Religious Council.

The types of expenses that will be deducted from the zakat calculations include self, wife, children, accommodation, education, transportation, medical, parents, and EPF (deducted from income because it has its own zakat treatment).


Zakat as a Tax Rebate

Zakat comes with one special perk, and that is the tax rebate. Zakat payment will help reduce the income tax tremendously as it falls under the tax rebate category, and in some cases, this rebate is sometimes enough to reduce the income tax to RM0.

For clueless payers out there, a tax rebate is a reduction in your tax expense after you have calculated your tax for the year, and it differs from tax relief which reduces your chargeable income (donations and charity work falls under the tax relief category). So, for example:

Roslynas income tax in 2016 : RM650

Roslynas Zakat in 2016 : RM350

Because zakat is a Tax Rebate, Roslynas income tax in 2013 is RM650 RM350 = RM300.

Zakat payment should not be seen as a burden, but rather a way for Muslims to appreciate the wealth thats bestowed upon them and to help those who are less fortunate. Visit our Islamic personal loans page to find the best Islamic personal loans in Malaysia! Have anything to contribute to this article? Do share your thoughts and ideas with us in the comments section down below!

This article has been adapted from a piece written by Balkish Rosly which previously appeared on Savemoney.my

0 comments

Agree or disagree with this post? Questions? You also have your word!

  • intan

    when filing for my income tax, I don't see a section to key in for tax rebate. Hope you can help me with this.

    Reply
  • MUSHTAQ AHMAD

    may i ask zakt on EPF saving if the person has enough saving in EPF should the person has to pay on zakat on EPF or only income saving? Also if the same person have enough saving in EPF but other side person is under debt of bank loan/credit card etc so how ?

    2nd question if i have calculated my zakat on wealth/income so zakat fitrah has to deduct from zakat on wealth or differently pay from the balance amount ...please answer me if possible

    Reply
    • RinggitPlus

      Greetings, MUSHTAQ AHMAD

      This situation is a little complex for us to provide a straight answer. However, we can recommend a useful source with regards to Zakat on EPF savings http://www.zakat.com.my/info-zakat/jenis-jenis-zakat/zakat-kwsp/. If you have any uncertainty, you can always contact Pusat Pungutan Zakat (PPZ) for more advice.

      Thanks for the advice and we hope this help.

      Reply
    • SM

      Zakat on savings, simply put, looks at how much you have inside your savings accounts for that Haul. But do we look at the financial obligations such as house mortgage, vehicle loans etc which technically, means that my savings should or could be used to pay off my loans. For e.g., if I have $100K in my savings. But my car loan is $50K, which I chose to pay monthly instead of a lump sum, do I calculate my Zakat based on $100K or $50K?

      Reply
      • RinggitPlus

        Hi, SM

        This question is rather complex as it deals with religion. As such, it is in your interest that you consult Pusat Pungutan Zakat (PPZ) for more information and advice.

        Thanks for the question and we hope this help.

        Reply
      • hi

        what if Im using my saving as my income? (EPF, ASNB) is it zakatable as well?

        Reply
        • RinggitPlus

          Hi, there.

          There are two types of Zakat according to the Pusat Pungutan Zakat: Zakat Fitrah and Zakat harta. In your case, savings, EPF, and ASB are zakatable as they are considered as zakat harta. You can read on http://www.zakat.com.my/info-zakat/jenis-jenis-zakat/zakat-wang-simpanan/ and also contact PPZ for more information.

          Thanks for the question and we hope this helps.

          Reply
        • YY

          How about sharing the interest distribution in zakat as well?
          Thanks.

          Reply
          • RinggitPlus

            Hi YY,

            We're not sure what you're asking.. Can you reword your question?
            The payment of zakat depends on the price of a portion of staple food in the area it's collected, and has no interest distribution attached to it.

            Reply