Zakat and Tax : Key Fundamentals in an Islamic Fiscal System

Zakat and taxation system are two key fundamentals in an Islamic fiscal system. While both are permeating with the essentials of commitment and obligation, they are two different perceptions which need to be widely understood and appreciated by the Muslim public.A Tax is charge on all the people of the state while Zakat is impose only on the Muslim members of the society. There are some differences between Zakat and Tax is as under:

Rate

The rate of Zakat has been (2.5%) fixed for all times, it cannot be changed. the saving of a person up to Rs.40 is Zakat able. but tax is levied on income and its rate is easily changeable by the government.

Payment

It is a religious duty to pay Zakat and believers feel pleasure, while paying of tax is not a sacred duty, it is also paid by non – Muslims even.

Kinds

Tax is of several forms, but imposed only on money, whereas Zakat is levied on cash, gold and animals as well but has no kinds.

Period

The Zakat is payable after full year has passed, but it is not necessary for tax, because it can be imposed less than his period.

Exemption

Tax can be exempted, but Zakat is to be paid at any cost, the state cannot do so.

Collection

Zakat can be paid individually, while tax is collected by the government. Although government is authorized to collect Zakat, but not always is so.

Utilization

The items of expenditure regarding Zakat have been clearly determined in the Quran and it cannot be spent elsewhere, but it is not the case for tax. The amount of tax can be expended by government in any way it likes.

Purification

The paying of Zakat is very important and it purifies the wealth, but tax does not serve this purpose.

Nisab

Nisab for Zakat is on cash of saving Rs. 40 per annum, in gold amounting to weight of 71/2 Tolas, Silver 521/2 Tolas at their market values. But taxable income varies from time to time