The word Zakat literarymeans purification. By purification is meant the purification of soul, character, life and wealth. Purification thus covers all the aspects of human life. Technically Zakat is a compulsory tax which is imposed on the wealthy Muslim people for providing social justice to community. In Holy Quran there are three words which have been repeatedly used for alms and charity for the poor. There are Sadqat, Infaq and Zakat. The first two i.e. Sadqat and Infaq are optional. The third one i.e. Zakat is compulsory tax on wealth of Muslim members of the state alone. It is levied to attain the following objectives.
1) Purification of Soul: Zakat purifies the soul of contributor from the evils of miserliness. It makes them humble and God-fearing.
2) Healthy growth of the Community: The payment of Zakat leads to the healthy growth of the community. The amount collected through Zakat is spent for the uplift of the less fortunate members of the society.
3) Mobilization of resources: Zakat is the hub of Islamic public finance. It is the chief source of income of the state which is spent for the greater benefit of the society by the state and rooting out poverty.
4) Right of the Poor: Payment of the zakat is the divine order. It is therefore the right of the poor to get share from the wealth of the rich in a Muslim society.
5) Enemy of hoarding: Zakat is levied on the hoarded wealth. Due to fear of God and the fear of the Day of Judgment, the Muslims are supposed to declare their hoarded wealth which is subject to zakat. Zakat therefore is the enemy of hoarding.
Difference between Zakat and Tax
Zakat is different from tax. The main differences between the two are as under.
1. Zakat has religious sanctity behind it. A tax on the other hand is compulsory contribution to the public authorities to cover the cost of services rendered by the state for the general benefit of the people. There is no religious duty involved in it.
2. Zakat is levied only on the Muslim members of the society, where as tax is levied on the citizens in proportion to their ability to pay.
3. Zakat is a compulsory payment which must be paid by Muslims. Zakat is not remitted. Tax though compulsory payment yet is remitable by the government.
4. In case of Zakat the sources and the rates are fixed by Holy Quran and cannot be changed by the government. Rates of taxes and their sources on the other hand can be changed by the government from time to time.
5. The income collected Zakat can only be spent on the specified items laid down by Holy Quran. Taxes can however be spent on various requirements as determined by the government.
6. Zakat is paid to the needy, the poor and whose hearts are reconciled to truth. The revenue collected from tax is spent for the general benefit of all its citizens.
7. Zakat is levied on all types of goods even animals, gold and silver ornament etc. held with individuals. Tax on the other hand is levied on the income earned from various sources.
8. Zakat is uncompromising enemy of hoarding. On the other hand tax is paid on the recorded income. The hoarded wealth remains exampled from tax.
9. Zakat rate is not variable, it is fixed while tax rate is variable not fixed.
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