Difference between Zakat on Property and Property Tax

zakat on property and property tax

We have noticed that a lot of people seem to be confused between zakat and property tax. At first glance, both zakat and property tax look the same but in reality, both of them are poles apart from each other.

In this article, we bring you a concise yet informative comparison between zakat and property tax

Difference between Zakat on Property and Property Tax

Zakat on Property Tax on Property
Basic Difference  A religious obligation that is compulsory by shari’ah (Islamic law) Imposed by the government 
Nature  Related solely to the religion  A source of funding for the government and has no religious grounds.
Usage  Used for cleansing of wealth and for the financial support of less fortunate people of the society. Mainly used for the development projects, the employee pays, education, health, etc.
Collection method and payers  Zakat is applicable to the Muslim community only.  Both Muslims and non-Muslims are subjected to property taxes.
Rate  In general, 2.5% of wealth subject to zakat (2.5775% for the solar year) Varies across countries. It is highly variable. 
Nature of sources  Zakat has fixed sources  Property tax may change according to the nature of the property you own
Compulsion  Easy terms and conditions  Relatively difficult terms and conditions. 
Payers’ expectations Zakat payers do not expect anything in return (of course, other than rewards from the Almighty for their good deeds) Taxpayers expect certain facilities from their governments in return for the payment of tax
Collection It can be paid individually Tax is only collected by government or its agencies
Geography If the amount of zakat is more than enough to meet the requirements of the country in which it is paid out, then it can be dispatched to other countries where poor Muslims live It can only be utilized in the countries in which it is collected

property zakat

Basic Difference

Zakat and property tax look strikingly similar but in reality, they are not.

Zakat is an Islamic finance term referring to the obligation that an individual has to donate a certain proportion of wealth each year to charitable causes. Zakat is a mandatory process for Muslims and is regarded as a form of worship.

On the contrary, 

Property tax is the annual amount paid by a landowner to the local government or the municipal corporation of his area.

In short, the property tax is a man-made system that carries no permanence and is subjected to change. On the other hand, zakat is prescribed by Allah Almighty in The Holy Quran and we cannot deviate from the set criteria.

Nature

Zakat is one of the five pillars of Islam and eligible Muslims must pay zakat every year. Hence, it is safe to say that zakat is solely related to religion.

Contrarily, property tax is related to government funds. Unlike zakat, property tax is not a religious sanctity. It is an amount that is to be paid to the government every year so that the government can further use it for different things such as health, education, payroll of employees, and welfare of people.

Usage

The usage of tax and zakat is of a different nature. Zakat is focused on less privileged people whereas taxes are used for the welfare of the general public. 

Tax is used mainly for the development projects of the country and to pay the government employees. On the other hand, the primary purpose of the zakat is to help the less fortunate people of the society. Not everyone is eligible to receive zakat. 

zakaat on property

Collection Method and Payers

Property tax is collected from all the citizens of the country who hold property under their name. Property tax is a provincial tax levied on the value of the property. It is generally levied at a flat rate of 10% but the tax rates vary, depending on the province. The tax collected by the state is further used by the government for different development projects across the country. 

On the other hand, zakat is collected from Muslims only. Non-Muslims are not subjected to zakat.

Rate

The rate of zakat is fixed as per the Quran. We cannot change the zakat ratio as it is already decided in the holy book. Zakat is calculated at 2.5 percent of the annual income of a person or a family. In short, zakat holds a permanent stature.

On the other hand, the tax rate is not permanent, and changes according to certain circumstances. For instance, people with different incomes fall into different tax brackets. Unlike zakat, the government has the authority to change the tax rate anytime they want. 

Nature of Sources

Both zakat and tax have different sources. Zakat has fixed sources whereas property tax may change according to the nature of the property you own. For instance, residential properties and commercial properties may have different tax rates. 

Tax can be direct or indirect whereas zakat is given by the person who has surplus wealth or earnings. The conditions of zakat differ and it can be given to only certain people. Get to know the business ideas with a small investment.

Zakat should be given to poor people, to free captives, to those who are in debt, those employed to collect funds, for Allaah’s Cause, and the wayfarer. 

tax on property in Pakistan

Compulsion

Zakat comes with easier terms and conditions. You can pay your tax throughout the year. It is necessary to pay the lump sum in one go. On the other hand, you have to pay property taxes in full amount to the government.  Every citizen irrespective of being rich or poor has to pay tax.

While Zakat has fixed sources, the sources of tax vary according to the needs.

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Payers’ Expectations

When one pays he or she does not expect anything in return. Zakat is a religious obligation and form of worship that is solely done for the blessing of Allah Almighty. 

On the other hand, when one pays property taxes, he or she expects certain things from the government such as proper infrastructure, security, good living conditions, and so on. 

Geography

If the amount of zakat is more than enough to meet the requirements of the country in which it is paid out, then it can be dispatched to other countries where poor Muslims live. In this way, all the Muslims across the globe can be benefited from the zakat. However, this is not the case with property taxes.

The tax cannot be distributed outside the country. It is solely collected for the prosperity and development of the citizens of that specific country. Get to know top visa-free countries for Pakistan. To know more about real estate trends and investment factors read top real estate YouTube channels

Conclusion: 

We hope this article proved to be informative and helpful for you and now you can see the difference between zakat and tax. We can see now that the primary objective of zakat is to alleviate poverty from the society. Property tax is also crucial because it is mandatory for the development and prosperity of society. Taxes can also cater to the needs of nonmuslims who are less fortunate and cannot afford a decent living. 

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If you have further questions regarding zakat and property taxes, leave us a message below. We will be more than happy to guide you through. Get to know basement construction cost.

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Comments

  1. Shaukat Ali says

    Can you please explain the usage of zakat as cleansing of wealth as you have described in your blog above?
    What exactly do you mean by “Cleansing of wealth”?. For example if a so called Shareef person aquires money by unlawul means weather by misapproprations, or stealing, will paying zakat on that money make his wealth clean and lawful?

    Reply

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