Zakat on End-of-Service Indemnity Calculator, Kuwait

1. 1No zakat is due before the award is received; the clock starts on the day it lands
2. 2Net zakatable wealth = the award received + the rest of your zakatable wealth − debts you owe
3. 3Nisab = 85 grams × the price of a gram of gold
4. 4Zakat = net × 2.5% on a lunar year, or × 2.577% on a solar one

Symbols

the start date

The day the award is received, not the day it fell due or the day service ended

the practical route

Fold what is left of it into your zakatable wealth and pay on it at your usual zakat date

what was spent

Zakat is on what remains at the end of the year, so anything spent during it carries none

What is due on an award held for a full year?

An employee receives an end-of-service indemnity of 6,000 KWD and keeps all of it until a full lunar year has passed, with no debts due, and the gold price is 42.500 KWD per gram.

1. Nisab: 85 × 42.500 = 3,612.500 KWD
2. Net zakatable wealth: 6,000 − 0 = 6,000 KWD, which is above the nisab
3. Zakat: 6,000 × 2.5% = 150.000 KWD

Zakat due is 150.000 KWD. Had the employee added the indemnity to other wealth paid on at a fixed date, the same rate would be paid on it with that wealth on its date even before a full year had passed, and had the year been counted on the solar calendar the rate would be 2.577% instead of 2.5%.

When does an award enter zakat?

An end-of-service indemnity becomes your money when you receive it, so the rules of zakat on wealth apply: 2.5% once it reaches the nisab and a full year has passed. The nisab is the value of 85 g of gold, that is 3,612.500 KWD at a reference price of 42.500 KWD per gram, a price you can change in the calculator so the nisab moves with it.

After receipt there are two well-known approaches. The first, the majority scholarly view, is that a new zakat year starts for the indemnity on the date you receive it, and you pay 2.5% of whatever remains once a lunar year has passed. The second, a practical approach many people follow, is to add the indemnity to your existing zakatable wealth and pay on it at your usual zakat date even if a full year has not passed over it. The calculator presents both without ruling between them; choose the one you are comfortable with or that a scholar has advised.

Under either approach the net figure is worked out after deducting debts you owe within the year, and if what remains of the indemnity is below the nisab on its own it may still reach it once added to your cash, gold and investments. If you count your year on the solar calendar the rate is 2.577%, because that year is longer than the lunar one. The amount of the indemnity itself is calculated under Private Sector Labour Law No. 6 of 2010; use our end-of-service calculator to work it out.

• The zakat rules start on the date you receive the indemnity, when the money is settled in your ownership
• Majority view: 2.5% of what remains of the indemnity once a lunar year has passed from receipt
• Practical approach: add it to your zakatable wealth and pay on it at your usual zakat date
• Nisab = 85 g × the gold price per gram (3,612.500 KWD at 42.500 KWD per gram), and debts due within the year are deducted