Your complete guide to understanding and calculating the Nisab of gold and the obligatory Zakat

Zakat is one of the five pillars of Islam, and it is a great obligation prescribed by Allah Almighty to purify the soul and wealth and to spread blessing in sustenance. Allah said: ﴿Establish prayer, give zakat, and obey the Messenger that you may receive mercy﴾, which indicates its immense importance in the life of the Muslim and the Islamic community.

With the increasing popularity of gold as a safe haven that protects wealth from inflation and economic crises, many people are asking about the Islamic rulings related to it, especially concerning zakat. A Muslim who owns gold, whether saved or jewelry for adornment, must understand the Islamic rulings concerning it, because the zakat on gold varies depending on the owner’s intention and method of use.

This article reviews the Islamic rulings on zakat of gold comprehensively, focusing on the nisab of gold and how to calculate it, the conditions for paying zakat, and answers to common questions asked by many Muslims.

Why is zakat on gold important?

Before delving into details, it is important to understand the religious motivation behind zakat on gold. This precious metal has been and still is one of the most important forms of wealth throughout history; people have used it in buying, selling, and saving since ancient times.

Islam mandated paying zakat on gold when it reaches the legal nisab and a full lunar year passes over it, because it is considered a wealth in itself. Withholding zakat on gold is considered hoarding, which is forbidden, as the Muslim keeps wealth that has a right for the poor and needy.

The Prophet صلى الله عليه وسلم warned strongly against this, saying: “No owner of gold or silver who does not pay its due, except that on the Day of Resurrection, plates of fire will be brought for him, with which his sides, forehead, and back will be scorched, and whenever they cool, they will be heated again for him for fifty thousand years.” (Narrated by Muslim).

Paying zakat is not only a financial obligation but also a great act of worship that achieves several objectives:

• Purifying the soul from greed and love of wealth
• Redistributing wealth among members of society
• Strengthening social solidarity and love among Muslims
• Gaining reward and divine pleasure

What is the nisab of gold?

The nisab of gold represents the minimum amount of gold that, if owned by a Muslim for a full lunar year, makes zakat obligatory. The Prophet صلى الله عليه وسلم said: “There is no zakat on you in gold until you have twenty dinars, and if you have twenty dinars and a year passes over them, then there is half a dinar in it.” (Narrated by Abu Dawood and Al-Bayhaqi).

Scholars estimated this to be approximately 85 grams of pure gold of 24 karats.

If a Muslim owns less than this amount, zakat is not due. But if it reaches or exceeds this threshold and a full lunar year passes, zakat becomes obligatory.

It is important to note that the nisab is not limited to physical gold only (bars and jewelry), but also includes:

• Gold exchange-traded funds (ETFs) (ETFs)
• Shares of gold mining companies
• Savings linked to gold prices

The nisab of gold according to purity

Gold varies in purity (karat), and thus the calculation of the nisab varies:

When calculating the nisab, only the purity percentage is considered. If you have gold of different karats, add the total weight of the pure gold and compare it to 85 grams.

How to correctly calculate zakat on gold?

The calculation is simple and clear. If the gold reaches the nisab and a full lunar year passes, zakat is paid at 2.5% of the market value of the pure gold.

Basic formula: Zakat on gold = 2.5% × Market value of pure gold

Practical example with 24-karat gold

Suppose you own 100 grams of 24-karat gold, and the market price per gram of pure gold is 400 SAR:

• Pure gold amount: 100 × 1 = 100 grams
• Total value: 100 × 400 = 40,000 SAR
• Zakat amount: 40,000 × 2.5% = 1,000 SAR

Example with 21-karat gold

If you own 100 grams of 21-karat gold at the same price:

• Pure gold amount: 100 × 0.875 = 87.5 grams
• Total value: 87.5 × 400 = 35,000 SAR
• Zakat amount: 35,000 × 2.5% = 875 SAR

Example with 18-karat gold

Similarly, if you own 100 grams of 18-karat gold:

• Pure gold amount: 100 × 0.75 = 75 grams
• Total value: 75 × 400 = 30,000 SAR
• Zakat amount: 30,000 × 2.5% = 750 SAR

Important note: In this last example, the gold does not reach the nisab (85 grams of pure gold), so zakat is not due.

Different rulings on zakat of gold

Islamic law distinguishes between different cases of gold regarding zakat:

1- Gold for investment and trade

If the gold is intended for sale, trading, or investment, zakat is obligatory according to the consensus of scholars. Imam An-Nawawi said that jewelry not used and kept for investment requires zakat.

Ibn al-Qayyim also clarified that if a woman changes her intention from using jewelry for adornment to using it for trade, zakat becomes due after a full lunar year from the time of the change.

This includes:

• Gold bars
• Gold coins
• Gold ETFs
• Gold investments in all forms

2- Jewelry used for adornment

Jewelry used daily for beautification (such as rings, bracelets, necklaces) has differing scholarly opinions:

The majority of scholars (Malik, Shafi’i, Ahmad) believe there is no zakat on jewelry used for daily wear, as it is considered similar to clothing and cosmetic tools.

The Hanafi school holds that zakat is obligatory on all gold jewelry even if for adornment, citing a weak hadith, and this opinion is less widespread.

Some Maliki scholars see a middle ground: zakat is due once only on gold jewelry used for adornment.

3- Gold for men

Islam forbids men from wearing gold jewelry, as the Prophet صلى الله عليه وسلم said: “Indeed, these two are forbidden for the males of my Ummah” referring to gold and silk.

However, this prohibition does not exempt the zakat obligation on the gold owned by men, whether in jewelry, bars, or investments. Men are required to pay zakat on their gold even if they do not wear it.

Who is obliged to pay zakat on gold?

Zakat is obligatory on every Muslim who meets certain conditions:

• Being adult and sane
• Owning the nisab of gold (85 grams of pure gold)
• A full lunar year has passed over their ownership (one Islamic year)

If these conditions are met, zakat is due whether the gold is in bars, coins, or jewelry for savings.

Eligible categories for zakat on gold

Allah Almighty specified in His Book eight categories deserving zakat: ﴿Zakat expenditures are only for the poor, the needy, those employed to collect [zakat], those whose hearts are to be reconciled, to free captives, those in debt, in the cause of Allah, and for the traveler.﴾

1- The poor: Those who do not have enough for their basic needs of food, clothing, and shelter.

2- The needy: Those who have some of their needs but have low income and suffer hardship.

3- Zakat collectors: Officials responsible for collecting and distributing zakat, who receive a wage for their work even if they are wealthy.

4- Those whose hearts are to be reconciled: People given zakat to strengthen their faith or win their favor for Islam, especially new Muslims.

5- To free slaves and captives: Supporting slaves and those in debt to free themselves; in modern times, this includes aiding oppressed people.

6- Those in debt: Those burdened with legitimate debts they cannot pay.

7- In the cause of Allah: Spending on what benefits Islam, defending the Muslim community, and any lawful work that strengthens religion.

8- The traveler: The stranded traveler who has lost his money far from home and has no means to return.

Who does not deserve zakat

Zakat is forbidden for groups that do not deserve it:

• The Prophet’s family and Banu Hashim: Islam exempted them out of reverence and to keep them free from “the impurities of people,” as the Prophet صلى الله عليه وسلم said.

• The wealthy: Those who are self-sufficient with their wealth or income.

• Able-bodied but lazy workers: Those capable of earning but neglect their work.

• Kafir (disbelievers): Because zakat is a specific act of worship for the Muslim community.

• Those whose dependents are supported by the payer: Parents, grandparents, wives, children, and sisters without a guardian, who suffer from their own wealth, not from zakat.

Shariah conditions for paying zakat

There are rulings governing the payment of zakat on gold to achieve its objectives:

• Not delaying it: Once the nisab is reached and a full lunar year passes, it must be paid immediately.
• Paying it to its rightful recipients: Only to the eight categories mentioned.
• Not deducting it from old debts: It should be paid from new wealth, not previous debts.
• Avoiding showing off (riya): It should be paid sincerely for Allah’s sake, not for fame.
• Paying the correct amount: Not underpaying.
• Not paying from unlawful wealth: Gold mixed with riba or unlawful money is not valid for purification.
• Not coercing or exchanging: It should not be tied to services or personal interests.
• Avoiding trickery in estimation: It is not permissible to reduce weight or price to evade zakat.

Frequently Asked Questions about zakat on gold

When is zakat due on gold?

Zakat is due when the gold reaches the nisab (85 grams of pure gold) and a full lunar year passes over it. It is preferable to pay immediately upon completing the year without delay.

Is zakat due on gold ETFs and non-material investments?

Yes, zakat is due on:

• Gold-backed index funds: Treated as direct ownership, and zakat is paid at 2.5% of the market value.
• Mining company shares: Zakat is paid based on the owner’s intention; if for trading, it is based on market value; if for long-term investment, only on profits.

How to calculate zakat on investment profits from gold?

In physical gold investments or gold-backed funds: evaluate the total value at market price at the end of the year, add profits, and pay 2.5% if the nisab is reached.

In mining stocks: zakat on realized profits is 2.5% after a full year; the principal stock amount is only zakatable if used for trading.

Can zakat be paid in cash instead of gold?

Yes, it is permissible to pay zakat in cash equivalent to the value of the gold at the current market price when paying.

What is the difference in calculation between 24, 21, and 18 karat gold?

The difference is in purity: 24-karat gold is 100% pure, 21-karat is 87.5%, and 18-karat is 75%. In calculation, multiply the total weight by the purity percentage to get the pure gold weight, then multiply by the price per gram and then by 2.5%.

Summary

Zakat on gold is an obligatory duty on every Muslim who owns an amount reaching the nisab of 85 grams of pure gold and a full lunar year has passed. It is paid at 2.5% of its market value, whether in bars, jewelry for savings, or gold investments.

Paying zakat is not only a financial obligation but also a great act of worship that purifies the soul, fosters social solidarity, and brings blessing in sustenance. A Muslim who pays it sincerely and with good intention fulfills Allah’s command and earns His pleasure, contributing to building a cohesive, strong society that cares for its weak.