Question

Assallamu aliakum

We have been doing IT business for last 5 months and its getting better and better. We get work through elance.com and some other forums. they charge us about 7% of the total value of any project. Actually, we want to know when we are obliged to pay zakat regarding income, and how to pay. Because, ratio of zakat varies from business to business.

Please guide us .

thanks

Answer

Assalamu Alaykum,

The rate for Zakah of your income depends on whether you own your company or whether you are just employed by a company and receive a salary from this employment.

In the former case, you are using both capital and labour to produce and therefore the rate will be 5% of the production (or its monetory value), due when the production is made.

In the latter case you are using only labour to produce and therefore the rate will be 10% of your income (as a surrogate for the value of the service produced), due when the income occurs.

Please note that in our opinion Zakah is, in fact, the tax that you need to pay to the state for the welfare of different affairs of society (as detailed in Al Tawbah 9:60). If you pay taxes to the government then you have every right to deduct the amount of tax from the Zakah that is due on you and only pay what is left (if any).

As for how to pay, since at our time the state does not formally collect Zakah, therefore you need to pay it yourself directly to those listed in the verse of Al Tawbah 9:60 or through organisations that accept Zakah money for this purpose.

Please note that the above is, in fact, an application of the principles of Zakah as we understand it. There can be differences of opinion about how these principles need to be applied in our times.