The payment of zakah is a way of purifying ones wealth. It saves from greed & selfishness & encourages him to be truthful & God-fearing in his financial dealings. Another purpose is to help the poor & the needy & to assist other causes in the way of Allah (God). Muslims know that it is a profitable investment (& not a loss) to help the reason for Allah (God) because it will establish economic balance & social justice, & simultaneously earn an immense reward in the Hereafter.
From the Islamic point of view, wealth belongs to Allah (God) & is held by human beings in trust; so a person has no right to make use of it to satisfy his whims. They has to observe the Divine commandments here, as elsewhere. For those whom Allah has lucky with wealth, it is a test; & Muslims ought to strive to pass this check by not becoming worshipers of hoarded wealth. They ought to use the wealth only in ways Allah (God) has allowed & recognize that the amount of zakah to be given is not their money but, , it belongs to those who have less than they do.
Zakah is of those one-of-a-kind forms of worship that bring out both the individual & the social aspects of `ibadah (worship). Think about its socio-political value: It frees society from the ill feelings arising out of class hatred. It opposes an individualism that is blind to the travails of ones neighbors & stands against a socialism that shackles individual freedom. It fosters neither selfishness nor renunciation. It also strengthens a sense of brotherhood & establishes social cohesion.
The resources liable for zakah in general terms are the balance remaining after meeting expenses. This means that at the finish of a year (calendar year or fiscal year) a Muslim has to calculate what amount must be paid for zakah. There's various rules for individuals, farms, factories & businesses.
Zakah is a compulsory payment & is neither charity nor a tax. It is expected from every Muslim individual. It is paid on the net balance after a Muslim has spent on basic necessities, relatives expenses, due credits, donations & taxes.
Zakah provides us with the chance of sharing our excess wealth with those less lucky than ourselves. In fact they & our wealth belong to Allah. They is the actual owner & they are merely the trustees of His wealth. They do our duty as trustees if they pay Zakah as an compulsory part of Ibadah.
Islam is a complete code of life which includes among other things, the economic side of life. Islam has its own economic principles. Zakah is of the basic principles of the Islamic economy, based on social welfare & fair distribution of wealth. In addition to the compulsory payment of Zakah, Muslims are encouraged in the Qur'an to make voluntary contributions to help the poor & needy, & for other social welfare purposes. This voluntary contribution is called Sadaqah (Charity).
Through the payment of Zakah, the rich share their wealth with the poor & thus the method of concentration of wealth is checked & fair distribution ensured. of the key concerns that lots of people have is that any Zakah given reaches the people in need, this means that there is no money kept by a charity for administration etc. Ummah Welfare Trust operate under a 100% donations policyowner, this means that every single penny reaches the people in need.