Zakat on Gold: How Much Gold Do You Need to Pay Every Year?

You may have heard of zakat fitrah, zakat on income, or zakat harta, but zakat emas or zakat on gold is rarely discussed. Whether it’s personal jewelry or investments, gold holdings are subject to zakat emas.

Important Things You Need to Know About Zakat Emas in Malaysia that You Must Know

Islam views gold as a symbol of valuable wealth that can grow. Due to its special status, Islam requires the payment of zakat emas on owned gold items.

Many Muslims, especially the current generation, choose to invest in gold, whether in the form of stocks, physical gold, or jewelry. Gold is considered a safe asset and a popular choice for investors due to its stable value.

Standard Rates for Gold Jewelry by State

The term “uruf” refers to the customary value of gold jewelry in a particular region. The uruf rates vary by state. Here are the current uruf rates for each state in Malaysia for your reference:

For states without uruf, all gold jewelry items are subject to zakat emas regardless of the weight of gold owned.

Types of Gold Holdings Requiring Zakat Payment

Zakat is obligatory for all eligible Muslims. The gold subject to zakat is usually pure gold, including gold bars, ore, coins, household utensils, jewelry, and other gold items. In essence, zakat emas can be divided into several categories of gold holdings:

1. Gold Used for Personal Wear

In general, there is no obligation to pay zakat for any form of gold used for personal wear. This is because gold used for personal wear no longer has the potential to grow. However, zakat emas must be paid if the gold used exceeds the uruf rate or is excessive.

For example, in the Federal Territory of Kuala Lumpur, the uruf rate for gold jewelry is 800 grams. This means that any gold used as jewelry, even if worn only once a year, is subject to zakat emas.

Formula for Calculating Zakat on Gold Used for Personal Wear

The zakat rate for gold used for personal wear is 2.5% of the total value of the gold. For instance, if the weight of jewelry used in a year is 900 grams:

= Weight of Gold Used (if exceeding the uruf rate) x Current Gold Price x 2.5% Zakat Rate
= 900 grams x RM165.68 (estimated current gold price) x 2.5%
= RM3,727.80

2. Stored Gold or Unused Gold

Stored gold refers to gold that is kept, including unused or damaged jewelry that is not worn or used even once a year. For gold mixed with other materials such as white gold or gemstones, zakat emas is calculated based on the percentage of pure gold only.

Zakat emas must be paid for stored gold if the weight of gold equals or exceeds the nisab threshold of 85 grams or 25 mithqal and has been held for a period of 12 lunar months (haul).

Formula for Calculating Zakat on Stored Gold

Just like with worn gold, the rate for zakat on stored gold is 2.5 percent of the total value of the gold. For example, if you have stored 200 grams of gold for a year:

= Weight of Stored Gold (if it exceeds the nisab value) x Current Gold Price x 2.5% Zakat Rate for Gold
= 200 grams x RM165.68 (estimated current gold price) x 2.5%
= RM828.40

3. Shariah-Compliant Gold Investments

In addition to zakat on stored gold, zakat is also obligatory for gold investments. In the context of gold investment accounts, shariah-compliant gold investments refer to physical gold that exists (in physical form) and can be owned by the investor. Shariah-compliant gold investments are typically divided into two types:

i. Physical Gold Investment

Physical gold that is owned with the intention of investment to generate profit. Physical gold can take forms such as coins, wafer, bars, ingots, and so on.

Formula for Calculating Zakat on Physical Gold Investment

If the total amount of gold holdings is equal to or exceeds the nisab value of 85 grams, then zakat is obligatory on this investment. For example, if the amount of gold intended for investment is 400 grams:

= Weight of Gold x Current Gold Price x 2.5%
= 400 grams x RM165.68 (estimated current gold price) x 2.5%
= RM1,656.80

ii. Gold Investment Account (Passbook)

Some banks offer gold investment accounts in the form of a passbook or gold savings account. This account records the amount of gold invested in grams.

Formula for Calculating Zakat on Gold Investment Account

Zakat is obligatory on Gold Investment Accounts if there is an intention to invest and the weight of gold meets the nisab value of 85 grams. For example, if the amount of gold held in the passbook is 200 grams:

= Weight of Gold x Current Gold Price x 2.5%
= 200 grams x RM165.68 (estimated current gold price) x 2.5%
= RM828.40

4. Non-Shariah-Compliant Gold Investments

In the context of gold investment accounts, this is known as non-shariah-compliant gold investment because there is no physical gold held. Zakat is only applicable to the principal investment if the investment amount exceeds the annual nisab value. It is calculated based on the formula for calculating Zakat on Cash Savings.

i. Gold Investment Account (Passbook) without Physical Gold

This investment is considered non-shariah-compliant because there is no physical gold involved, and it is not owned by the investor. Zakat is only applicable to the principal investment if the investment amount exceeds the annual nisab value. It is calculated based on the formula for calculating Zakat on Cash Savings.

ii. Virtual Gold Investment Account

Virtual gold account refers to gold traded for investment purposes in a non-physical form. Virtual gold trading is done through electronic platforms. This means that investors with accounts at a specific broker can buy and sell gold at the current displayed price on the platform.

Since this gold trading does not involve physical gold, it is categorized as a non-shariah-compliant gold investment. Zakat is only applicable to the principal investment if the investment amount exceeds the annual nisab rate.

Formula for Calculating Zakat on Non-Shariah-Compliant Gold Investments

Here’s an example calculation for zakat on non-shariah-compliant gold investment for your reference:
= Principal Investment or Minimum Balance x Zakat Rate
= RM40,000 (example) x 2.5%
= RM1,000

Get Health Insurance for Peace of Mind in the Future

Gold on zakat provides significant benefits to society. By paying gold zakat, individuals can purify their wealth and increase blessings in life, while also helping to reduce social inequality in the community.

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