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Zakat on Savings: Savings in the bank

[Zakat in Practice (part 10)]

[Introduction: This series is a sharing on zakat from the perspective of a financial planner. It is hoped to be educational, informative as well as practical to help readers better understand Zakat, especially Zakat on Wealth, as a Muslim in Singapore.

Topics to include: Zakat on Investment, Zakat on Savings, and Zakat on Estate.]

[Previously: Zakat on Savings]

As mentioned in the previous post, Savings in the bank can be categorised into:

  1. Accessible
  2. Non-accessible

For savings accounts that are accessible (ease of withdrawal), such as the common savings accounts and current accounts, Zakat is due when you have fulfilled:

  • Nisab (“minimum sum”)
  • Haul (holding period of 1 Hijri year)

As mentioned in part 5, one’s Nisab may not fall on Ramadan. However, there is no harm to defer one’s zakat payment to Ramadan, so long as it does not reach another Haul.

However, this leads to confusion for some: having to backtrack 12 months to the previous Ramadan. And it does not help that your bank statement does not follow the Hijri calendar.

My proposed solution:

Adopt a financial year. Generally, one’s financial year would be January to December.

If the amount at the end of December is above Nisab, you pay zakat on it (2.5% of amount).

This is in accordance to the Hanafi madhhab, which I find to be more practical. At the same time, it is also the manner in which one would calculate zakat on investment.

Hence, it would facilitate one to coordinate paying zakat for both his savings and investments.

(Financially speaking, savings is a form of investment, albeit the worst, as it brings minimal or no returns. But assurance of safekeeping.)

(To be continued)


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