How should I calculate Zakat on my salary i.e. on gross or net basis? What will be the exemptions? If I go by the Income Tax method, then how do I treat the tax deducted at source by my organization?
Answer
Calculate 10% of your gross salary and then deduct the income tax you are paying to a Muslim state. The rest is what you can spend as zakat on the avenues of your choice. If the tax is more, you don’t have to pay anything extra.
I have read on your website that the rate of zakat on salary is 10%, and not 2.5%. Would you please give references/logic for that?
Answer
The logic of 10% Zakat on salary is that it is like production. We render/produce our services for which we get salaries every month. We are expected to pay Zakat immediately after we get the reward for our services as the farmer is expected to pay Zakat (Ushr) the same day when he harvests his crop.
2.5% Zakat is applicable on wealth every year. Our salary is not the additional wealth that we keep over and above our needs. It is what we earn and therefore, in my opinion, needs to be treated as an earning/producing unit.