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ZAKAT

Zakah, or alms-giving, is the practice of charitable giving by Muslims based on accumulated wealth, and is obligatory for all who are able to do so. It is considered to be a personal responsibility for Muslims to ease economic hardship for others and eliminate inequality. Zakah consists of spending a fixed portion of one's wealth for the benefit of the poor or needy, including slaves, debtors and travellers. A muslim may also donate more as an act of voluntary charity (sadaqah), in order to achieve additional divine reward.

There are two main types of zakah. First, there is the zakah on traffic, which is a fixed amount based on the cost of food that is paid during the month of Ramadan by the head of a family for himself and his dependents. Second, there is the zakah on wealth, which covers money made in business, savings, income, and so on. In current usage zakah is treated as a 2.5% levy on most valuables and savings held for a full lunar year, as long as the total value is more than a basic minimum known as nisab (three ounces or 87.48g of gold). As of 16 October 2006, nisab is approximately US$1,750 or an equivalent amount in any other currency. Many Shi'ites are expected to pay an additional amount in the form of a khums tax, which they consider to be a separate ritual practice.