Khums is an Arabic term which means one-fifth. Based on the Quran and various hadiths, it is referred to as profits, gains, earnings, property, and savings. Islamic tax is a particular term used in Islam, and it means ‘one-fifth’ or ‘20%.’
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In simple words, it’s like giving away a part of some things you own to support the Islamic State. This kind of tax in Islamic law applies to certain types of wealth, like when you acquire something valuable or win something in a battle.”
Calculating Khums is all about how Islamic economics works. This post will discuss the whole system in detail and in the easiest way possible. But, we should remember that Islamic economics is just one piece of a bigger picture.
Islam is like a well-organized plan for life, covering everything from religion and beliefs to how people live together, politics, and what’s considered right and wrong based on the Sharia laid out to us by Prophet Muhammad (ﷺ). If Muslims dream of living a peaceful life, then it is recommended that they practice Islamic teachings.
The Prophet (ﷺ) gave some important instructions. He said, “I want you to do 4 things and avoid 4 others. First, believe in Allah, which means you should say that only Allah deserves to be worshipped. Second, pray properly. Third, give to those in need (Zakat). Fourth, fast during Ramadan. And also, share one-fifth of the things you get in war as a way of giving back to Allah.
Now, here are the things you should avoid: Don’t use Ad-dubba’, An-Naqir, Al-Hantam, and Al-Muzaffat. These are tools used for making alcoholic drinks.” (You can also find this in Hadith No. 50, Vol. 1).Sahih Al-Bukhari hadith
- khums calculator (Click here)
- What Income, Profit, & Surplus Mean.
- Allowed deductions for "Khums."
- For example.
- Is there a limit on how much money you can spend on your home?
- Can I remove money from my earnings if I lose something in my house?
- The rules about household expenses and having more than one source of income:
- When both the husband and the wife work.
- Khums Calculator (Click here)
Khums in the time of the prophet’s (ﷺ) grandfather Abdul Muttalib
Islamic tax was Introduced in Islam by Abdu ‘l-Muttalib, the grandfather of Prophet Muhammad (ﷺ), which continues in Islam. Abdu ‘l-Muttalib saw in his dream when he rediscovered the well of Zamzam. When he dug it up, he found many valuable things hidden there by the Ismailites long ago. They had hidden these treasures because they feared their enemies would take them.
When Abdu ‘l-Muttalib found these treasures, he gave one-fifth of them (called khums) to serve God’s purpose and kept the remaining four-fifths for himself. This became a tradition in his family. Even after the Prophet’s (ﷺ) migration (hijrah), this system was adopted in Islam.
So, the first Islamic tax didn’t come from the ‘spoils of war’ but from a hidden treasure, one of the seven things subject to Islamic tax.
What is Khums?
The meaning of khums is one-fifth or 20% of certain items a person acquires as wealth and must be paid as an obligatory Islamic tax.
Be aware that when you acquire any spoils, one-fifth of it belongs to Allah and the Messenger, as well as close relatives, orphans, the needy, and travelers in need, if you truly believe in Allah and what was revealed to His servant on the Day of Badr, when the two armies met. And Allah is Most competent of everything.(8:41)
Islam has introduced various methods to bring about this equality in the economic condition of the people. A meaningful way is transferring excess wealth from the fortunate sector of the society to its less fortunate members. This happens in two ways: one for each person and one for all of us together.
Types of Khums.
What are these certain things? According to the teachings of the Imams of Ahlu ‘l-bayt, there are seven things that are subject to Islamic tax:
- The extra money you make, or the profit.
- Money that is earned in a proper way but is mixed with some that are not appropriately earned.
- Mines and minerals.
- Precious stones are collected from the sea through diving.
- Hidden treasures.
- Land that a non-Muslim buys from a Muslim.
- The things are taken as spoils of war.
The quran ayat about Khums (Islamic tax).
Who is Obligated to Pay Islamic tax?
Indeed, in Shia Islam, paying Khums is obligatory if an individual has reached the age of puberty and meets specific criteria. They should pay 20% of their annual earnings from the remaining savings after covering necessary expenses like food, accommodation, insurance, and medical bills. Khums is applied to the surplus income that remains after these essential expenditures.
Calculating Islamic tax
Khums becomes obligatory every new financial year on the profit or the surplus of past years’s income. What does the beginning of the new year mean? When the gain and excess of the revenues become apparent to one. Whenever there is profit or surplus not used on household or commercial expenses, you must divide it one-fifth as Islamic tax.
We think about the “year” when it comes to khums because, in many situations, we only know how much extra money we have at the end of the year. But in reality, khums is connected to any extra cash or profit you make as soon as you know about it. You can choose to pay Islamic tax before the year ends if you want to.
It is entirely up to you to choose any day of the year when you want to pay Islamic tax, whether based on the Hijrah Calendar or the Christian calendar. Once you’ve decided on this particular day, you can use it as a reference point to calculate your annual income and pay your khums tax. It’s generally more convenient to keep track of your earnings from this chosen day each year.
What Income, Profit, & Surplus Mean.
Khums is a mandatory tax on the profit or surplus of your income after subtracting your yearly expenses. To help clarify this, let me explain what we mean by “income,” “surplus,” and “expenditure.”
Income: Income refers to what you earn from your job, business, wages, salary, dividends, or any other possessions that are recognized by the shari’ah (Islamic law).
Now, you might wonder if khums are also required for gifts, prizes, legacies, charity, zakat, and khums. According to most current scholars, paying khums on these items is also advisable.
Legacy: When we talk about a gift, we mean something left to you in someone’s will, whether from a friend or someone not related to you. However, khums are not obligatory on dowries or inheritances, except when you inherit from someone unexpectedly, like a distant relative you didn’t anticipate inheriting from.
Dowry: Dowry, also known as “mahr,” is the marriage gift that a husband agrees to pay his wife at the time of marriage or whenever she requests it. In Islam, a dowry isn’t something a woman possesses at the time of divorce or her husband’s death; it’s her right, which she has immediately after the marriage is consummated.
Surplus or Profit: If you’re a wage earner, “surplus” means whatever is left after subtracting your annual expenses, including those for yourself and your dependents. Dependents are the people you are responsible for supporting, whether obligatory (like your spouse, children, and parents) or not (like relatives, friends, or orphans).
Allowed deductions for “Khums.”
What you can deduct from your household expenses:
- Food, drinks, places to stay, getting around, things in your home, special parties like weddings, when you’re sick, and money taken from your paycheck for Provident Fund.
- Costs for special occasions like weddings
- Money spent on health issues
- Giving to charity or helping others
- Paying off debts, but only if they’re for essential things.
- Penalties that you have to pay which are required by the law.
- The salary is given to people who work for you.
- Money for insurance (Car, bike, fire), but not for “permanent life insurance because it is considered savings.”
- Money taken out of your salary for things like retirement or pension plans
- The money you get from mandatory retirement or pension plans, but you have to pay a part of it as a “khums” if you can save anything from it.
- The money you save for retirement, which is also subject to khums if it’s not mandatory
- If you can’t pay khums because you’ve invested a lot in retirement plans, you can make a plan to pay it later.
Is there a limit on how much money you can spend on your home?
The answer is, it depends on you! Everyone’s different, and how much you can spend on your home should match your needs and how well-off you are.
Let’s say someone makes $20,000 in a year, and what they need, and their situation thinks they should spend $10,000 on their home yearly. If they go over that and spend $15,000, they must pay extra “khums” on everything above $10,000.
But if they live and only spend $7,000, they must pay khums on everything above $7,000. If what they earn and need are the same, then they don’t have to pay any khums.
Can I remove money from my earnings if I lose something in my house?
It depends on what you lost. If it’s something you use for business or not for your house, you can’t take money away from what you earned before paying khums.
But if it’s something like furniture or clothes you lost, which belong in your house, you can buy new ones or fix them. The cost of purchasing new ones or repairing them can be included in your yearly expenses for khums.
The rules about household expenses and having more than one source of income:
Let’s say there’s a person named Ahmad. Every year, he spends $10,000 for his everyday needs. Now, Ahmad gets a special gift of $10,000 from his father and earns $20,000 during that year.
Ahmad has two choices:
- He can use the $10,000 he got from his father to cover his yearly expenses. In this case, he’ll pay Khums the whole $20,000 he earned during the year. The $10,000 he inherited doesn’t need Khums.
- Or, Ahmad can subtract the $10,000 he needs for his yearly expenses from the $20,000 he earned. Then, he pays Khums on the remaining $10,000, the extra money he made. The $10,000 he inherited from his father shouldn’t be given as Khums.
When both the husband and the wife work.
When both the husband and the wife work and bring in money for the family, here’s how khums works simply:
- First, add up all the money the husband and the wife earn. This is the total income.
- Next, determine how much they spend together on food, bills, and other expenses. This is the total expenditure.
- Now, subtract the total expenditure from the total income. The remaining money is what they need to pay Khums.
- It’s important to know that whatever the wife spends on household expenses is like a gift to the husband responsible for caring for the family in Islam. So, this amount increases the husband’s income, and the khums are calculated based on this combined income.
Distributing Khums Funds
The khums must be divided into two halves. Half the amount goes to the Imam of the time, a special leader (Sahm Al-Imam), and the other half goes to the Sadaat, who are the relatives of the Holy Prophet (ﷺ), and this is called Sahm As-Sadaat.
The Sadaat’s share should be given to those who are poor, orphans, or in need, even if they are not inferior in their hometown.
In our time, it’s essential to give the Imam’s share to a fair religious leader or their representative (Wakeel). They will use it for things the Imam believes will benefit the Muslim community, like supporting schools and religious institutions.
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What is difference between khums and Zakat?
The difference between Khums and zakat is given below in the table.
|Meaning||One-fifth (20%) tax on specific types of wealth||Almsgiving; obligatory alms tax for Muslims|
|Purpose||Supports the religious leadership (Imam) and the Sadaat (descendants of the Prophet)||Helps those in need, such as the poor, orphans, and the needy|
|Types of Wealth||Applies to specific items like war booty, surplus income, minerals, sea objects, etc.||Applies to savings, income, livestock, and certain types of assets|
|Distribution||Khums is divided into two parts, one for the Imam and one for the Sadaat||Zakat is distributed directly to eligible recipients|
|Recipients||The Imam’s share is used for various community needs, including religious institutions||Directly given to individuals in need, such as the poor and needy|
|Calculation||Calculated based on specific categories of income and wealth||Calculated as a percentage (usually 2.5%) of one’s savings and eligible assets|
Do all Muslims pay Khums?
Not all Muslims pay Khums. Shia Muslims mainly practice Khums, while Sunni Muslims follow different forms of giving, like Zakat.
What is the rule of Khums?
The rule of Khums is a religious obligation for Shia Muslims, requiring them to give one-fifth (20%) of certain earnings and wealth to support religious and community needs.
What type of tax is Khums?
Khums is a religious tax in Shia Islam intended to benefit the religious leadership and the descendants of the Prophet (ﷺ).
What is khums in Shia Islam?
In Shia Islam, Khums is a mandatory contribution of one-fifth of specific earnings and wealth to support religious and community needs.
Who collects khums?
Khums are typically collected by religious leaders or their representatives, who distribute them according to Islamic jurisprudence guidelines.
Why do shia Muslims gives Khums?
Shia Muslims give Khums a religious duty to support their religious leadership and the descendants of the Prophet (ﷺ) and contribute to community welfare.
Do Shia pay 20% zakat?
No, Shia Muslims do not pay 20% Zakat. They pay Khums, a different obligatory contribution, while Zakat is typically 2.5% and is practiced by Sunni and Shia Muslims to help those in need.