The Two Nisabs, and Why They No Longer Agree

Two thresholds, one rule, and a ratio of exactly seven

The classical sources set the nisab twice over, in the two metals that circulated as money: twenty mithqal of gold, and two hundred dirhams of silver. They were stated as alternatives because at the time they were the same amount of money. Converting them into grams requires a decision about how heavy a mithqal and a dirham were, and two answers are in wide use. AAOIFI's Shari'ah Standard on Zakah gives 85 grams of gold and 595 grams of silver. A second convention, using a mithqal of about 4.374 grams, gives 87.48 grams and 612.36 grams. The difference between the conventions is under three percent, which is small enough to ignore in most situations and worth knowing about when you are near the line.

The arithmetic fact that explains everything else is that both conventions preserve exactly the same ratio. 595 divided by 85 is 7. 612.36 divided by 87.48 is 7. The silver nisab is seven times the weight of the gold nisab, always. It follows immediately that the two thresholds have equal value if and only if gold costs exactly seven times as much as silver per gram — and that the ratio between them, whichever convention you use, is the market gold-to-silver price ratio divided by seven. At the assumed prices of $80 and $0.95 a gram the price ratio is 84.2, so the gold nisab is 12.03 times the silver nisab. Every disagreement about the nisab is downstream of that single division.

The two used to agree, and then silver stopped being money

The two definitions were not offered as alternatives with different results. They were offered as two descriptions of one amount, in the two currencies people actually had. For that to work, twenty gold coins had to be worth about two hundred silver coins — a price ratio of about seven to one, which is close to what the historical record suggests held in the region at the time. Under a bimetallic monetary system with both metals circulating at legal weights, that ratio is not free to drift very far: arbitrage between the two coinages holds it in a band. The rule was therefore stable for as long as the monetary system that produced it was stable.

It is not stable any more, and the reason is not that gold went up. It is that silver was demonetised. Once the world's monetary systems stopped defining currencies in silver, silver became an industrial and ornamental metal whose price tracks industrial demand rather than the value of money, while gold retained a monetary role as a reserve asset. The gold-to-silver price ratio, which the rule implicitly assumed to be about seven, has spent the modern era in the range of roughly fifty to a hundred. Divide by seven and you get the modern gap between the two thresholds. Nothing about the classical rule changed; the world it described did.

Which threshold applies is a disagreement, not a lookup

The case for silver is that a lower threshold brings more people into the obligation, and that the beneficiaries of zakat are better served by a wide base than a narrow one. It has the merit of caution: if you pay on the silver nisab you have certainly discharged the obligation on either view, whereas if you use gold and gold turns out to be the wrong standard you have not. Most of the large international zakat organisations publish a silver-based nisab for exactly this reason, and it is the position a person who wants to avoid the risk of underpaying will take.

The case for gold is that the threshold was never about a weight of metal; it was about a level of surplus. Two hundred dirhams was a meaningful sum — enough to mark the boundary between a household that has a margin and one that does not. A silver-based nisab of a few hundred units of currency does not mark that boundary in a modern economy; it can catch a student's current account. On this view, holding to the letter of the silver measure while its purchasing power has collapsed defeats the purpose of having a threshold at all, and gold, which retained its monetary character, is the better proxy for what the rule was pointing at. This is not a fringe position; it is argued seriously and it is what many individual scholars advise. There is no arbiter who settles it. Use the calculator with both thresholds, see whether the answer differs in your case, and if it does, take the question to someone you trust — and be aware that the honest answer to "what is the nisab" is a range, not a number.

One fortieth, and a year that is eleven days short

The rate is the least controversial part of the whole calculation: one fortieth, which is 2.5 percent, of net zakatable wealth, payable once the wealth has been held above the nisab for a complete lunar year. The complication is the calendar. Twelve synodic months average 354.37 days against a tropical year of 365.24, so a lunar year is about 10.9 days shorter. Anyone who reckons zakat on a Gregorian financial year is therefore covering more days than the rule contemplates, and needs to scale the rate up. Saudi Arabia's Zakat, Tax and Customs Authority publishes exactly that adjustment for corporate filers: the rate is 2.5 percent divided by 354 and multiplied by the actual number of days in the period, which for a 365-day year gives 2.5777 percent.

The size of that adjustment is easy to underrate. On $20,000 of net zakatable wealth the lunar-year rate gives $500 and the Gregorian-year rate gives $515.54 — a difference of $15.54 in a single year, which is small. But over a working lifetime the difference is a whole extra payment: 33 solar years contain 34.01 lunar years, so a person who reckons by the moon pays once more, over that span, than a person who reckons by the sun. Neither method is wrong so long as it is applied consistently and the rate is scaled to match the period. What is wrong is switching between them, or using the lunar rate on a solar period, which quietly underpays every year forever.

What counts, what nets off, and what does not count at all

Zakat falls on wealth that grows or can grow, held in surplus. In practice that means cash in hand and in accounts, gold and silver in any form, the market value of goods held for trade, receivables you reasonably expect to collect, and financial investments. It does not fall on the home you live in, the car you drive, the clothes you wear, the tools and machinery you use to earn a living, or the premises of your business — these are means of living, not surplus, and the distinction is the whole logic of the rule. The line is drawn by purpose rather than by asset class: a property held to live in is exempt, the same property held as trading stock is zakatable at market value, and the same property let out is generally treated by its rental income rather than its capital value.

Debts complicate the picture, and the mainstream contemporary treatment is narrower than most people assume. Immediate liabilities — this month's rent, unpaid bills, a tax payment falling due, the instalments of a long-term loan that fall within the coming year — are deducted from zakatable assets before the rate is applied. The full outstanding balance of a long-term debt is generally not deducted, because otherwise a person with a large mortgage and substantial savings would never owe zakat, which is plainly not the intent. So take total zakatable assets, subtract only the liabilities that fall due within the year, and compare the remainder with the nisab. On assets of $22,400 with $2,400 of liabilities falling due, the net is $20,000, which clears both thresholds, and the zakat is $500.

The case where the two thresholds give different answers

Most of the time the choice of nisab does not matter, because most people who are wondering are either well above both thresholds or well below both. The choice matters in one band, and it is worth naming it precisely: net zakatable wealth between $565.25 and $6,800 at the assumed prices. Someone holding $600 is above the silver nisab and far below the gold one. On the silver standard they owe $15. On the gold standard they owe nothing. That is the entire practical content of the disagreement, and it applies to a great many young savers, students and households whose surplus is a few hundred rather than a few thousand.

One last property of the rule is worth stating plainly, because it changes how people think about it: zakat is charged on a stock, not on income. A pot that earns nothing and is never added to shrinks by 2.5 percent every lunar year, so after ten years it retains 0.975 to the tenth power — 77.63 percent of what it started with. On $20,000 that is $15,526.59, a loss of $4,473.41 to zakat alone. That is not a flaw in the design; it is the design. A rule that taxes idle wealth and leaves productive assets and means of living alone is pushing hoarded surplus back into circulation on purpose, and the arithmetic is doing exactly what it was built to do.

Frequently asked questions

Should I use the gold nisab or the silver nisab?

There is no consensus answer, and anyone who gives you one without saying so is skipping a real disagreement. The silver nisab is lower, so it brings more payers into the obligation, and it is the standard published by most large zakat charities on the reasoning that a wider base better serves the recipients. The gold nisab is defended on the ground that the threshold was calibrated to a level of surplus rather than a weight of metal, and that silver's demonetisation broke the link. Two practical observations. First, the choice only matters if your net zakatable wealth falls between the two thresholds — check whether it does before spending any time on the question. Second, paying on the silver nisab satisfies the obligation under either view, so if you want certainty at a modest cost, that is the direction certainty points. If the amount is material to you, take the question to a scholar you trust rather than to a calculator.

Does the lunar year mean my zakat date moves every year?

Yes, by about eleven days, and that is the point rather than an inconvenience. The obligation attaches when qualifying wealth has been held above the nisab for one complete lunar year, so the anniversary drifts backwards through the Gregorian calendar at roughly 10.9 days a year and completes a full circuit in about 33 years. Many people find it easier to fix on a date they will remember — a particular day of Ramadan is common — and pay then every year. If instead you reckon on a Gregorian financial year, the honest correction is to scale the rate to the period: Saudi Arabia's zakat authority uses 2.5 percent divided by 354 and multiplied by the number of days, which is 2.5777 percent for a 365-day year and 2.5847 percent for a 366-day one. What you should not do is use a 354-day rate on a 365-day period, which underpays by about three percent of the zakat every single year.

Do I pay zakat on my house, my car and my pension?

Not on the house you live in, not on the car you drive, and not on personal effects — these are means of living rather than growing wealth, and the rule has excluded them from the beginning. The same logic exempts the tools, machinery and premises a business uses to operate, as distinct from the stock it holds to sell, which is zakatable at market value. Pensions and long-term savings vehicles are the genuinely contested case, and the answer turns on access: where the funds are yours and you could draw them, the mainstream contemporary position treats them as zakatable, sometimes with an adjustment for the portion of the underlying holdings that are themselves non-zakatable assets, and sometimes at a reduced base to reflect penalties and tax on withdrawal. Where the entitlement is a promise from an employer or a state that you cannot access or assign, most scholars treat it as outside the base until it is received. The practical instruction is to write down what you actually control today, and to ask specifically about anything you cannot touch.

Can I deduct my mortgage from my zakatable wealth?

Only the part of it that falls due within the year, on the mainstream contemporary view. The reasoning is straightforward once you state the alternative: if the whole outstanding balance of a long-term loan were deductible, then a household with a large mortgage and substantial liquid savings would show negative net wealth and never owe zakat, however comfortable it actually was. That is plainly not what the rule intends, so the deduction is confined to liabilities that are actually pressing on this year's resources — the coming twelve months of instalments, unpaid bills, taxes falling due, and short-term borrowing. Practically: list your zakatable assets, list the liabilities due within the year, subtract, and compare the result with the nisab. On $22,400 of assets against $2,400 of near-term liabilities, the base is $20,000 and the zakat is $500. A minority position is more generous on debt and a minority is stricter; if the difference changes whether you cross the nisab at all, that is the moment to ask rather than to assume.

What if my wealth dipped below the nisab during the year?

The dominant contemporary practice is to test the nisab at the two ends of the year and not to restart the clock for a dip in the middle. If you were above the threshold when the year began and you are above it on your zakat date, the year counts and zakat is due on the balance held on that date. The reasoning is practical rather than doctrinal: money in a working household moves constantly, and a rule that reset every time a current account fell below a threshold for a fortnight would be unworkable and would reward bad timing. A genuine fall below the nisab that persists — you spend the money, you lose it, the balance stays low — does break the year, and the clock restarts when you next cross the threshold. Note also that the amount you pay on is the balance on the zakat date, not the average and not the low point, so the date you fix does affect the bill; fix it once and keep it rather than choosing it each year to suit the balance.