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ZAKAT and RIBA – Are they connected?

The common perception about ‘Zakat’ is that it is a 2.5% religious tax on your assets. However, this idea is not supported by the Quran at all. Zakat is not restricted to money as we shall see.

 

OUR OBLIGATIONS

008:041 And know that, surely whatever profit/ghanim you acquire from anything, then indeed one-fifth (20%) of it is for Allah and for the messenger (propagation of Quran only) and for the near relatives and the orphans and the needy and the sons of the way, if you believe in Allah and whatever We sent down on Our servant on the day when the Criterion (is established), the day when two accumulations are met. And Allah has Power over everything.

 

Sons of the way: Those who have temporarily become dependent on others for sustenance.

 

Ghanim = Gain, Surplus, Gift, Acquisitions, Net Profit.

To get a better understanding of the word ‘Ghanim’ refer to 4:94

 

004:094: O You who believe! When you go forth in the cause of Allah), use your discernment. And do not say, out of a desire for the fleeting gains of this worldly life, to anyone who offers you the greeting of peace, “You are not a believer.”

For with Allah is abundant Gains/Ghanim. Remember, once you were ignorant, and you were weak like the disbelievers are now. God has been Gracious to you, so be gracious to His servants. Use your discernment. Allah is always Aware of what you do.

 

•              Here we see that “MUGHANIM” is definitely not referring to any war booty, rather Maghanim in 4:94, obviously refers to excessive bounties. Applying this meaning in a consistent fashion would lead to the correct understanding of 8:41 whereby ghanim would mean any sort of excess/gain. War booty could classify as “Ghanim” but the important distinction to make here is that it is not restricted to war booty.

 

 

 

OBLIGATION ON SALARY, GOLD AND PROPERTY:

It is generally a practice to pay 2.5% every year on your income, property and gold. This is a wrong concept. You don’t have to pay every year.

 

  • Gold : 20% on the total value of the gold at the time when you received it. Then when you will sell it at a profit, then you will have to pay 20% on the net profit only.
  • Property: 20% on the net profit gained at the time of sale of the property. But if you received it as a gift then pay 20% on the total value.
  • SALARY: After spending on your RUNNING EXPENDITURE, give away the 20% from the remaining Ghanim/net profit.

 

 

WHAT IS RIBA? – Perception About Deal And Interest Traditional Translation

002:275: Those who consume interest cannot stand [on the Day of Resurrection] except as one stands who is being beaten by Satan into insanity. That is because they say, “Trade is [just] like interest.” But Allah has permitted trade and has forbidden interest. So whoever has received an admonition from his Lord and desists may have what is past, and his affair rests with Allah. But whoever returns to [dealing in interest or usury] – those are the companions of the Fire; they will abide eternally therein.

 

First things first, what is the difference between interest on money and rent income on property? In the case of banking, the asset used to generate income is cash. On the other hand, the asset used to generate income in the case of property is land/building.

 

Both of these are instruments of wealth are identical sources of income. There is a fixed rate of interest when you invest in a bank and similarly there is a fixed amount of rent when you invest in real estate. So, why would Allah forbid interest and allow other sources of income? Except that He does not. And that we will explore by contemplating what Riba actually means.

 

 

 

 

HALAL AND HARAM

008:069 So consume whatever you have gained/profited from, provided that it is lawful and appropriate. And revere Allah, for Allah is The Forgiving, The Merciful.

 

•              Basically, this verse commands us to consume the profit which is lawful. So the question arises: what is the unlawful profit?

 

Let us take an example: “Paul is a businessman. He receives a profit of $10,000 at the end of the year. In order to purify (Zakat) his soul, he would donate 20% of the net profit ($2000) to the 6 categories mentioned in 8:41. So he is left with a justified profit of $8000 and this is lawful for him. However, failing to give $2000 would result in an unlawful increase which is what Riba means.

 

002:276: Allah obliterates Ar-riba/the increase, and increases sadaqa/charity (in a society). And Allah does not like a rejecting sinner.

 

•              Just to make a small point here, in the verse above, the word Riba is used twice in succession. If we translate it to interest in the first instance (Al-riba), then it is not possible to use it as interest in the second instance (Wa-Yurbi), whereas if we take it as increase, then it is befitting in both instances.

•              Anyways, linguistics aside, as a consequence of following 8:41 and 8:69 (mentioned above), the natural folding of events is that Riba is obliterated and monetary contribution will increase in a society leading to a fairer distribution of income.

 

For Example: A person invests in a house and then rents it out to another person. Now the landlord has a deal with the tenant that he will pay him a certain amount of money as rent. Now this rental is his income and it is not his interest. Similarly a person invests in a bank and rents his money to the bank. In return the bank pays him a certain amount of money. So this is also his income and not his interest. It is a deal between the person and the bank.

 

 

 

 

RIBA FORBIDDEN?

004:161 And they consumed Ar-riba/the increase, although they were prohibited about it. And they consumed the wealth of the mankind with falsehood. Therefore, We have prepared a painful punishment for the rejecters.

 

•              Looking at this from an economic perspective, we could all very well relate to this. The reason of extreme highs and lows of income and wealth arise due to the unwillingness of wealthy people to share their money with others. Therefore, they consume Riba in falsehood which originally belongs to the low income households as per 8:41.

 

 

CONSUMING MULTIPLIED RIBA

003:130 O you who believe! Do not consume riba/increase multiplying it. And revere Allah so that you may prosper.

 

•              Now, we know that we are to donate 20% of all gains/profit in order to avoid consuming Riba. However, if we fail to observe this commandment, the Riba keeps multiplying as time passes by.

 

Let’s take another example here: Paul is expected to pay $2000 out of the $10000 profit he acquired. But for some reason, he doesn’t and consumes it. Assuming that he makes the same profit next year, if he fails to give it away, his consumption of Riba has multiplied from $2000 to a total of $4000 and so on. We are to, of course, avoid this. That is simply what the verse illustrates.

 

GIVE AWAY AR-RIBA

002:278 O you, who believe! Revere Allah and distribute whatever is remaining from Ar- riba/increase, if you are believers.

 

Another example would be useful here. Paul had been consuming Riba for the past 10 years, when the knowledge had not yet come to him. If he did not purchase any assets from the Riba, it would obviously be forgiven to him as there is essentially nothing ‘remaining’ to pay for. But, let’s assume, that he inherited a house worth $50000 from his father, prior to realizing the concept of Riba. Now that he has understood it, he would have to give away $10000 to the 6 categories mentioned in 8:41 as he owns an inherited (gained/ghanim) asset on which no payment has been made. That is essentially what the verse is telling us.

 

If you have anything ‘remaining’ of any sort of assets on which you have not paid the compulsory 20% tax, it is ordered that you must do so.

 

Note: That this tax is based on gaining something. You only pay for it when you receive something additional to your needs. It is NOT a yearly tax.

 

 

WAR DUE TO CONSUMING RIBA

002:279 So if you do not refrain, then take a notice of war from Allah and His Messenger. However, if you repent, then you may keep your principle (8o %). Do not be an oppressor, and you will not be oppressed.

 

•              Obviously, the war here is not a physical one. It is a mental war with one’s self. When one devoid himself from purifying his soul by not distributing his money/resources to the needy, he will never have peace of mind. Allah and His Messenger bring inner peace into one’s life, so if one has a limitless greed to acquire more and more resources, he is essentially at war with them due to the disharmony in the soul.

 

047:036: Indeed the life of this world is play and amusement. And if you believe and revere, He will reward you and He will not ask you of your wealth.

 

047:037 If He were to demand and compel you for it, you would cling to it in stinginess, and He would thus reveal your shortcomings.

 

•              The point to realize here is that the 20% of gain does not belong to us at all. It belongs to the society. Of course, voluntary charity is encouraged in verses such as 2:215 and 2:219, but we would not be held accountable for the money that is essentially ours (80% of gain). As we all know, different economic times require different measures from the citizens, so it’s all situation based, really. The next verse expounds on this concept.

 

 

047:038 You are those who are called upon to spend (your wealth and person) in the cause of Allah. Yet, among you there are such who turn stingy. Anyone who is miser is miser against his own ‘self’. Allah is Self-Sufficient, while you are poor/dependent. And if you turn away, He will replace you with another people, and they will not be like you.

 

002:261 The example of those who spend in the way of Allah is like the example of grain that grows seven ears in each ear there are 100 grains. And Allah multiplies it according to His Laws. And Allah is Spacious and Knowing.

 

– Spending one unit in the way of Allah earns a reward of 700 units. That might come in the shape of monetary resources, more spirituality or/and other similar measures.

 

ALLAH’S ECONOMIC SYSTEM

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059:007 And what Allah restored to His Messenger from the residents of the towns, so it is for Allah and for the Messenger and for near relatives and orphans the needy and the sons of the way, so that it may not remain circulating among the rich amongst you. And whatever the Messenger gives you, so take it; and whatever he forbids then abstain from it. And take guard against evil with Allah. Indeed, Allah is severe in penalty.

 

– This is a perfect and just economic system which if followed, will certainly eradicate poverty from the society.

 

– It is very clear from the above Ayat that Allah does not want the wealth to remain in the hands of rich people and the fact that the needy have a due share in the wealth of the rich people.

 

 

SUMMARY

 

– To leave the remaining (one fifth/20%) which we are consuming as increase.

– Heads of the wealth (80%) is ours after paying the remaining (one fifth/20%)

– We are oppressing ourselves and we will also be oppressed by Allah by paying 2.5% and not paying the remaining 17.5%

– By paying the remaining 17.5% we shall enjoy our wealth as we like.

– We are inviting a war with Allah and His messenger by not paying the remaining (one fifth/20%).

 

002:275 Those who consume Riba (Increase) run around like someone who has been bitten by a snake. That is because they proclaim that Al-Bai/Trade (Banking) is Ar-riba (the increase). However, Allah has made Al-Bai/Trade (Banking) permissible, and made Ar-riba (increase) unlawful. One to whom the clear Admonition has come from his Nourisher/Sustainer, must abstain from consuming Riba (Increase). What he has consumed in the past, he may keep and his judgment rests with Allah. As for him who transgresses, such are the dwellers of the fire wherein they shall abide forever.

 

– Those who are bent on continually increasing their income/wealth, without contributing to their respective societies, run around aimlessly seeking to gain more and more. Therefore these people are the companions of Fire (fury/rage/no growth of the soul).

– These people claim that banking is Riba whereas Allah has allowed all sorts legal trades including banking but has forbidden us to consume 20% of gains.

 

WHAT IS ZAKAT?

Zakat in its organic sense means to ‘purify’. It could be the purification of the body, mind, soul, wealth, society etc. The Quran asks us to purify ourselves by giving zakat.

 

– Body Purification- Fasting

– Wealth Purification-Sadaqa and Obligation

– Soul purification-Salat and Reforming ourselves by Ayats of Allah

 

BODY PURIFICATION:

 

002:183 O you who have believe! Decreed upon you is fasting as it was decreed upon those before you that you may revere.

 

WEALTH PURIFICATION

009:103 Take sadaqa/charity from their wealth so that you purify/cleanse them so that they are justified through it and support him. Indeed your support is a great source of peace in their hearts. Allah is Hearing, Knowing.

 

SOUL PURIFICATION

 

013:028 Those who believe and whose hearts are assured by the remembrance of Allah. Unquestionably, by the remembrance of Allah hearts are assured.”

 

CONCLUSION

So spend whatever you wish to spend in the way of Allah as sadaqa/charity, from the remaining 80%. And always remember that spend thrifts are the brothers of shaitan. Extravaganza is a sin.

 

017:027 Indeed, the extravagant are brothers of the shaitans (selfish desires) And shaitan is ever ungrateful to his Nourisher/Sustainer.

By A.Waseem

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