Donation in Islam is called Zakat. This is alms-giving.
Zakat or alms-giving is the practice of charitable giving by Muslims based on accumulated wealth, and is obligatory for all who are able to do so. It is considered to be a personal responsibility for Muslims to ease economic hardship for others and eliminate inequality.
Zakat consists of spending 2.5% of one's wealth for the benefit of the poor or needy, including slaves, debtors and travellers. A Muslim may also donate more as an act of voluntary charity (sadaqah), in order to achieve additional divine reward.
There are two main types of Zakah. First, there is the kajj, which is a fixed amount based on the cost of food that is paid during the month of Ramadan by the head of a family for himself and his dependents. Second, there is the Zakat on wealth, which covers money made in business, savings, income, and so on.
In current usage Zakat is treated as a 2.5% collections on most valuables and savings held for a full lunar year, as long as the total value is more than a basic minimum known as nisab (three ounces or 87.48g of gold). As of 20 September 2008, nisab is approximately $2,640 or an equivalent amount in any other currency.
Many Shi'ites are expected to pay an additional amount in the form of a khums tax, which they consider to be a separate ritual practice.
There are four principles that should be followed when giving the Zakah:
- The giver must declare to Allah his intention to give the Zakah.
- The Zakah must be paid on the day that it is due. If one fails to pay the Zakat, people think he is refusing to fulfill God's wishes.
- Payment must be in kind. This means if one has a lot of money then he needs to pay 2.5% of his income. If he does not have much money, he needs to pay in a different way. For example, if he has a lot of cattle, then he pays in cattle instead of money.
- The Zakah must be distributed in the community from which it was taken.