Calculation Methodology

Zakat Engine follows the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) Shariah Standard No. 35 — Zakah. AAOIFI is an internationally recognised standard-setting body for Islamic finance, headquartered in Bahrain, whose standards are adopted by financial institutions in over 40 countries.

SS-35 provides detailed rulings on which assets are Zakatable, how they should be valued, what thresholds apply, and how debts may be deducted. It draws on the scholarly consensus of the four major Sunni madhabs while providing practical guidance for modern asset classes.

Where SS-35 acknowledges multiple valid scholarly positions (for example, on jewellery or debt deduction), Zakat Engine implements each madhab's position separately, allowing users to select the ruling that applies to them.

The standard Zakat rate on monetary assets and trade goods is 2.5% (1/40). This is the rate applying to:

• Cash and bank deposits
• Gold and silver (if above nisab)
• Stocks and traded securities
• Cryptocurrency
• Business inventory and receivables
• Net rental income

The engine does not currently implement the agricultural rates (10% or 5%) or the livestock Zakat rules, as these are outside the scope of the current asset categories.

Zakat is only due if your total Zakatable wealth exceeds the nisab — the minimum threshold. There are two established nisab values:

Zakat Engine fetches live gold and silver spot prices from GoldAPI.io and caches them in Redis (refreshed every 15 minutes). These are used to compute the nisab in your chosen currency in real time. Static fallback prices activate automatically if the live feed is unavailable.

Which nisab applies to you depends on your madhab (see Section 5). The Hanafi school uses the silver nisab (the lower threshold, making Zakat more widely applicable). The other three schools default to the gold nisab.

Zakat Engine supports ten asset categories, each with its AAOIFI-mandated valuation method:

The four Sunni madhabs agree on the core 2.5% rate and the major asset categories, but differ on two key questions: which nisab threshold applies, and how debts may reduce your Zakatable base.

Debt Deduction Rules

Worked Debt Example

Consider a user with £30,000 in cash and a £20,000 outstanding credit card and personal loan:

Hawl is the requirement that wealth must remain above the nisab for a full Islamic lunar year (one Hijri year) before Zakat becomes due. One Hijri year is approximately 354.37 solar days — about 11 days shorter than the Gregorian calendar year.

Practically, this means your Zakat anniversary drifts earlier each solar year. Zakat Engine converts your stored hawl date (Gregorian) into its Hijri equivalent, advances by exactly one Hijri year, and converts back to Gregorian to determine your next anniversary.

The engine uses a validated Hijri conversion library and handles edge cases where the exact Hijri day does not exist in the target month (Hijri months vary between 29 and 30 days).

Income purification is separate from Zakatand applies specifically to stocks or funds that have some exposure to non-compliant revenue (e.g., conventional bank interest income within a company's accounts).

The purification amount is computed as:

For example: £10,000 of shares in a company where 3% of revenue comes from impermissible sources → £300 purification amount. This is paid separately as general charitable giving (sadaqah), not counted toward your Zakat.

Every calculation produced by Zakat Engine can be fully audited:

• Immutable snapshots: Each saved calculation stores a complete snapshot of all asset values, nisab prices at the time of calculation, deductions applied, and the madhab used. The result can never be retroactively altered by price movements.
• Decimal arithmetic: All monetary calculations use arbitrary-precision decimal arithmetic (not binary floating-point) to prevent rounding errors and accumulation drift.
• Transparent breakdown: The calculation result includes a per-category breakdown showing exactly how much of each asset type is Zakatable and at what rate.
• PDF certificates: Paid-tier users can download a signed PDF certificate showing the full calculation, nisab data, and an AAOIFI compliance disclaimer.