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Calculating 10% Zakat On Salary And Related Allowances
AA,
I have a very simple question, do the allowances received on top of your basic salary, are to be considered when calculating your Zakat on Salary income? Or just the Basic Salary (Taxable by the governments), is to be considered only.
Apparently it seems logical to say Yes because the allowances are also sort of your income. But I’m just asking to know if the basis on which the governments don’t include the allowances when calculating the Income Tax, can also be considered when calculating the Zakat?
Regards,
Haris Munawar
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5 Replies
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Calculating 10% Zakat On Salary And Related Allowances
updated 3 years, 7 months ago
2 Members
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5
Replies
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It really depends on the allowance. For example, if your company pays you an allowance for phone bills and you spend that money in paying your phone bills then there’s no zakat on it. However, certain companies pay an additional amount (allowance) for years of service. That is considered part of your production and you should pay zakat on it.
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Thanks much for the reply, so if I may try to understand the rule out of it;
‘If your employer is providing you allowance other than the ‘service allowance/bonus’ etc, but rather the allowance is for availing some facility, e.g. a big part is of Medical usually, and then something for fuel and mobile bills’. So this money can be considered out of the Zakat bracket.
So would this be correct to understand, and also if you can explain the main reason to exclude such an amount when calculating the Zakat?
Thanks & Regards.
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The principle is that zakat is on production or wages you earn for doing a job. If your employer is providing you money for something that’s required for you to do your job, that money is not considered production, hence there is no zakat on it.
If they’re providing you an allowance for your phone bill, they have assumed that your job requires use of phone and instead of providing you with a company phone, they have made an administrative decision to give you the money instead. That’s exempt from production / earnings zakat. However, if they provide you $100 for phone bill but you end up spending only $80, the remaining $20 will end up in your bank account. When you pay 2.5% zakat on assets once a year, it will be covered there.
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Thanks for the reply.
So if I may ask one more question, the medical allowance is usually of a greater amount than other allowances, and it is also something not mandatory to consume and is also something which is everybody’s need, no matter what the person is earning. So if you can also comment particularly on medical allowance, or whatever the employer gives you a compensation on medical concerns, would that still be something to exclude when calculating the Zakat?
Jazak Allah!
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First of all medical allowance is exempt by the state for the purpose of taxes, hence it’s exempt from zakat as well. Also medical allowance is given to you by your employer because in their assessment your well being (and perhaps that of your family) is important for you to perform your job. It is not a wage for your effort.
If you enter in appropriate numbers in our zakat calculator after reading the description for each box, it already takes care of such intricacies.
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