Cash is the easy case. Traders and farmers are where most questions arise, and the rules are genuinely different, not just harder versions of the same rule.
Business stock and trade goods
If you hold goods with the intention of selling them, they are subject to Zakat. On your Zakat date:
- Value the stock at what you could sell it for now, not what you paid for it, and not the marked retail price you hope to get.
- Add business cash, bank balances and mobile money floats.
- Add receivables you reasonably expect to collect. Leave out bad debts you do not expect to see.
- Subtract trade payables and other debts falling due within the year.
The net figure joins your personal qualifying wealth, and the whole is compared against nisab. The rate is 2.5 per cent.
Fixed assets are not included. The shop building, the shelving, the delivery motorcycle, the sewing machine, the milling equipment: these are tools of the trade, not stock. Their earnings are counted as cash; the assets themselves are not.
A worked example
A trader in Arua holds stock she could sell for 3,000,000 shillings, has 400,000 in mobile money, is owed 250,000 she expects to collect, and owes a supplier 500,000 due next month.
3,000,000 + 400,000 + 250,000 − 500,000 = 3,150,000. If that is above nisab and has been for the lunar year, Zakat is 3,150,000 × 0.025 = 78,750 shillings.
Livestock
Livestock Zakat applies to grazing animals kept for breeding or milk, not to animals being fattened for sale, which are trade stock and follow the rules above. It is paid in animals rather than cash, and has its own thresholds:
- Cattle: nothing due below 30. At 30, one one-year-old calf. At 40, one two-year-old. The schedule continues in steps above that.
- Goats and sheep: nothing due below 40. From 40 to 120, one animal. From 121 to 200, two. From 201 to 300, three, then one more for each additional hundred.
- Camels: a separate schedule beginning at five.
The animals must have grazed freely on open pasture for most of the year. Animals kept and fed entirely on purchased fodder are treated differently, and scholars differ on the detail. A working herd owner should take their actual numbers to a scholar once, then apply the same reasoning each year.
Farm produce
Agricultural Zakat, sometimes called ushr, is due at harvest, not on a lunar year, and the rate depends on how the crop was watered:
- 10 per cent where the crop was watered naturally, by rain, a river or a spring.
- 5 per cent where the farmer paid to irrigate, by pump, purchased water or bought fuel.
- Where both applied through the season, a proportionate rate, commonly taken as 7.5 per cent.
The threshold is five wasq, usually given as roughly 653 kilograms of the staple crop. Below that, nothing is due. The Hanafi position applies it to all produce without a minimum; other schools apply it to storable staples such as maize, millet, sorghum and rice.
Costs of production are deducted before calculating on the majority contemporary view. Coffee and cocoa grown for sale are treated by many scholars as trade goods rather than staple produce.
What about savings for a specific purpose?
Money saved for hajj, a wedding, school fees or building a house is still wealth you own, and is subject to Zakat while you hold it. Intention to spend it later does not exempt it.
Pension and long-term savings
Where you can access the money, it is subject to Zakat. Where it is genuinely locked and you have no right to draw it, most contemporary scholars hold that Zakat becomes due when you receive it. Positions differ, so ask about your particular scheme.
Traders and farmers should settle their method once, with a scholar, and then apply it consistently. Consistency matters more than finding the lowest possible figure.