The payment of Zakat is a religious obligation for Muslims, to make contributions towards the less fortunate. It is one of the five pillars of Islam and is intended to redistribute wealth between the rich and the poor as well as cleanse the wealth of those who pay zakat.
There are two different types of zakat to be paid:
Zakat Fitrah (voluntary tithe paid during the month of Ramadan)
Zakat Harta (tithe on property owned by the Muslim)
Who is eligible to pay Zakat?
Zakat is compulsory ("wajib") for all adult Muslims, whose total annual wealth meets or exceeds the nisab. Below are the conditions every Muslim must meet:
Owns their own wealth
Posses minimum amount of wealth based on the Nisab
Have had wealth in their possession for the minimum haul
Wealth should be of productive nature (can be derived as profit i.e gold, silver etc.)
How to pay for Zakat?
Muslims in Malaysia are encouraged to make their zakat payments to the government’s zakat collection centres for proper distribution to the needy.
One way employees can pay for their zakat is through a Monthly Salary Deduction scheme. In order to avoid a clash with the Monthly Tax Deduction (or Potongan Cukai Bulanan) for income tax, employers can make adjustments so that the monthly zakat deduction is taken from the monthly tax deduction.
There are several ways on how you can pay Zakat:
Lembaga Zakat Selangor branch
At the bank counter
Monthly salary deduction scheme
Employees/Employers can check with respective state’s official zakat website for legitimate methods of payment.
How to Process Zakat in Talenox?
Here's how you can process Zakat in payroll based on either of the 2 scenarios that apply to your employees below:
Zakat Payment by Employee: Zakat amounts is paid to the Zakat Office by the employee themselves
Zakat Paid by Employer: Employer will make the Zakat amount payment (specified by employee) to the Zakat Office on behalf of the employee; deducted through employee salary in payroll
1) Zakat Payment by Employee
If your employees are to handle the payment for Zakat themselves, it is not mandatory for the employer to deduct the amount from employee's monthly salary.
However, you will have to request for your employees to let you know the monthly Zakat amounts paid out by them each month. This is because Zakat payments will affect PCB/MTD calculations (based on the formula).
Hence, it's important for you to know how much they have paid out each month and include this amount as a tax deduction item using the "Zakat" item type in Step 4 - Select Tax Deductions and BIK/VOLA:
By including your employee's paid-out zakat payments into the system in Step 4 - Select Tax Deductions and BIK/VOLA, this will ONLY help with including zakat amounts processed as part of PCB/MTD contribution calculations for the month. This will not deduct anything from employee's salary in payroll.
2) Zakat Paid by Employer
If you are making Zakat amount payments (specified by employee) to the Zakat Office on behalf of the employee, you'll need to process Zakat payments in employee payroll so that:
Zakat amounts are deducted from your employee's salary paid out in the month AND
Zakat amounts are captured in PCB/MTD contribution calculations for the employee for the payroll month
You'll have to use the "Zakat Deduction" pay item under the Ad Hoc Payment/Deduction tab in payroll under Step 3 - Select Pay Item:
This will ensure that the Zakat payment will deduct from the employee's net salary amounts paid out to them in the month.
Once you include this "Zakat Deduction" pay item into Step 3 - Select Pay Item, this will also ensure that the system automatically includes the "Zakat" item type in Step 4 - Select Tax Deductions and BIK/VOLA with the 'ZAKAT THROUGH SALARY' remarks keyed in by default.
The "Zakat" item type amounts in Step 4 will be included in PCB/MTD contribution calculations in Talenox for the employee for the payroll month. 😎
The "Zakat" item type will automatically appear in Step 4 - Select Tax Deductions and BIK/VOLA as long as a "Zakat Deduction" pay item is included into Step 3 - Select Pay Item in payroll.
The default remarks of 'ZAKAT THROUGH SALARY' is to help users identify if the "Zakat" amount is pulled over from Step 3 - Select Pay Item, for further verifications and clarity.
Have fun processing Zakat Payments in Talenox for your employees!