Purifying Charity (Zakat)

Conditions for Obligation

Free, adult, sane Muslims.
Possession of Nisab, and the passage of one, uninterrupted lunar year over it (uninterrupted in the sense that at no point during that period does the amount of money drop to zero. However, if it drops below the Nisab without disappearing completely, the year is not considered to be interrupted as long as the amount is over the Nisab at the period-end.)
Zakat is due on : gold, silver, cash, gold or silver jewelry, produce, livestock, trade-goods.
Non-zakatable items : house one lives in, cars one uses, clothes one wears, household furniture, weapons one uses, jewels or other jewelry besides gold and silver unless acquired for trade, interest (riba) - it must be disposed of.

Zakat on Gold, Silver and Cash

Nisab for gold is 20 mithqal = 2.81 troy oz.= 87.48g
Nisab for silver is 200 dirhams = 19.69 troy oz = 612.36g (~$)
2.5% on the amount present at lunar year-end.
Gold and silver jewelry is zakatable, as are gold and silver utensils.
Loans to others are zakatable provided they are guaranteed.

Zakat on Trade-Goods

Zakat due on any trade-goods (including raw materials) if their value reaches the nisab value of gold or silver. The year need not be uninterrupted.
Value of goods is added to value of gold and silver for purposes of nisab.
Shares and bonds are zakatable on the income from investment if the company deals with land and immovable property the income and current share-price in other cases
Machinery, land, fixtures and fittings are exempt fom zakat.

Zakat on Other Items
Produce: 10%
Animals.

Payment of Zakat
- Intention is essetial

May only be given to the following categories:

faqir : poor; one who has some money, but not sufficient for his basic needs
miskin : destitute; one who has nothing
`amil `alayha : zakat collector, appointed by the Caliph
mu'allafah qulubuhum : 'those whose hearts are to be reconciled'
fi'r-riqab : to slaves to purchase their freedom
gharim : one in debt for a legitimate reason
fi sabilillah : in the path of Allah = mujaahidin.
ibnu's-sabil : wayfarer; one stranded away from home, with no money available to him.
May be given to any or all of these categories. It is preferred to give to one's needy relatives for whom one is not financially responsible Islamically. It is disliked to give too much or too little to any one individual.

May not be given to:

non-Muslims
well-off or rich people
father, grandfather, etc.
son, grandson, etc.
wife or husband
Banu Hashim (family of the Prophet-saw) and their freed slaves
an employee or laborer as wages
an institution
It is disliked to transfer zakat funds to another country, unless there is a legitimate need.

Etiquettes of Paying Zakat

Understand the rationale
- test of love for Allah
- ridding oneself of miserliness
- thankfulness to Allah
Pay it in secret, preferably.
Do not ruin it by reminder and injury.
Do not consider it to be big.
Spend the best of your wealth.
Seek out the most pious, knowledgeable and dignified people.