Calculating Zakat on cash and savings can feel confusing for many Muslims. Questions like what counts as Zakatable wealth, how to apply the 2.5% Zakat rate, or whether your money meets the Nisab limit often create uncertainty. This easy guide simplifies everything by explaining the Zakat formula, eligible assets, and practical examples so you can fulfill this important Islamic obligation with clarity and confidence.
How to Calculate Zakat on Cash – The Basic Formula
The method of calculating Zakat on money is simple: add all your cash-based assets and multiply the total by the fixed Zakat rate of 2.5%.
Zakat Formula
Zakat Payable = (Total Zakatable Cash Assets) × 0.025
Include these in your total cash assets:
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Cash in hand at home
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Savings account balance
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Current/checking account balance
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Shariah-compliant fixed deposits
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Business cash reserved for trading
Zakat Calculation Example (Pakistani Rupees)
To make this easier, here’s a real example. Suppose a person holds the following amounts at the end of their Islamic lunar year (Hawl):
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Cash at home: Rs. 50,000
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Savings account: Rs. 100,000
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Current account: Rs. 30,000
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Islamic fixed deposit: Rs. 70,000
Step 1: Add Total Cash Assets
50,000 + 100,000 + 30,000 + 70,000 = Rs. 250,000
Step 2: Apply the Zakat Rate (2.5%)
Rs. 250,000 × 0.025 = Rs. 6,250
➡️ Zakat due on Rs. 250,000 is Rs. 6,250.
Note: This calculation assumes:
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Your wealth stayed with you for one full lunar year.
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Your total exceeds the Nisab (value of 85 grams of gold).
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You deduct any short-term necessities and outstanding debts before calculation.
Important Conditions for Paying Zakat on Money
Before calculating, make sure the following Islamic requirements are fulfilled:
✔ 1. Complete Ownership (Milk al-Tam)
The cash must fully belong to you.
✔ 2. One Lunar Year (Hawl)
The wealth should remain in your possession for 12 Islamic months.
✔ 3. Nisab Eligibility
Your wealth must equal or exceed the value of 85 grams of gold.
Zakat Rules for Different Types of Cash & Accounts
| Asset Type | Zakat Rule | Key Consideration |
|---|---|---|
| Cash in Hand | 2.5% on total amount held for a year | Count all physical cash |
| Bank Balances | 2.5% on savings, current & Islamic deposits | Use lowest balance of the year or year-end balance if above Nisab |
| Cash Savings | Fully Zakatable. Example: Zakat on Rs. 100,000 = Rs. 2,500 | Must be surplus after essential needs |
| Trade Cash & Inventory | 2.5% on cash + goods for business | Value goods at market rate at year-end |
| Stocks & Investments | Zakat generally applies | Calculate depending on market value or underlying assets |
Special Note on Bank Types
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Islamic Bank Accounts:
Zakat is due on both the principal and halal profit. -
Conventional/Interest-Based Banks:
Zakat applies only to your principal.
Interest (Riba) is forbidden and cannot be used to pay Zakat.
Give Your Zakat With Purpose and Impact
Calculating Zakat correctly is only the first step—choosing where to donate it is where your contribution truly transforms lives.
At Pakistan Sweet Home, every orphaned child carries a story of pain, courage, and hope. Your Zakat doesn’t just fulfill a duty—it becomes a lifeline.
Your Zakat Helps Provide:
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Essential Support: Nutritious meals, safe housing, medical care, and clothing
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Education: Quality schooling, tutoring, and skill-building activities
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Emotional Healing: A loving environment that restores confidence and hope
Your Zakat can become the beginning of a new chapter for a child who has lost everything. Fulfill your sacred obligation by giving them security, love, and a brighter future.