There are several types of taxes, which have different impositions and features depending upon their nature. Zakat is also considered one of them. But that is not correct as Zakat is a tax imposed on one religion; there are many differences between a normal tax and Zakat. All these differences apply that Zakat should not be considered as the normal tax.
Zakat vs Tax
The main difference between Zakat and Tax is that Zakat is only imposed on the Muslims of the Country because it is very important after the payer for their religion, whereas tax is imposed on all citizens of the country by the Government for better development.
Zakat is known as a religious tax or duty that is fixed in the holy Quran, according to which Muslims should pay Zakat to help the other Muslim, although it is not compulsory in most of the country. The main motive is the help of poor and needy Muslims.
Tax is the amount of money charged by the government which has to be paid by every single citizen of the country irrespective of their religion. The main motive of the tax collection is the development of the country and providing facilities to its citizens and is not bounded by geographical boundary.
Comparison Table Between Zakat and Tax
| Parameter of Comparison | Zakat | Tax |
| Meaning | A religious tax, most important after prayers. | The Compulsory fee charged by the government for the country’s development. |
| Related to | Religious Tax | Related to government |
| Imposed on | Only Muslims of the Country. | All citizens of the country |
| Sources | Has Fixed Sources | Several Sources |
| Compulsion | Is not Compulsory | It is Compulsory |
What is Zakat?
All Muslims who are wealthy enough have to pay a certain amount as Zakat for charitable causes. It is considered to be an important way of salvation. Although it is not compulsory to pay, most Muslims pay Zakat as it is very important, which is fixed by the Holy Quran.
There are five pillars of Islam:
- Declaration of Faith
- Ramadan Fasting
- Prayer
- Hajj pilgrimage
- Zakat
Zakat is calculated on the income, and the most common amount that is paid is 2.5% or ¼ of the total savings.
Importance of Zakat:
- Balanced Society: it helps in making a balanced society by uplifting the below poverty line section.
- Circulation of Money: it circulates the money among the people.
- Means of salvation: it is considered a means of salvation for Muslims.
- Value of Sacrifice: it promotes the value of sacrifice among society.
Misconception related to Zakat:
- It is a misconception about Zakat that it is only given during Ramadan.
- That only gold is paid as Zakat.
- Relatives cannot be given the Zakat.
Zakat has several criticisms, such as it has failed to achieve its main goal, which is to help the poor and needy Muslims.
What is Tax?
Tax is a compulsory fee charged by the Government from the citizens of the country. And if any person is failed to pay the tax, he is punishable by law.
Benefits of Tax:
- Development in the public health sector
- Public Insurance
- Benefits for Unemployment
- Development is public transportation
- Development in the educational sector
- Providing facilities to the public
- Overall development of the country
Types of Taxes
Direct Tax: it is the type of tax paid directly to the government. Direct Tax includes the following:
- Income tax: this tax is charged on the income or the profit of citizens.
- Capital Gains: it is charged on the capital sale or the investments.
- Securities Transaction Tax: charged on the trade of securities and the stock market.
- Corporate Tax: it includes Dividend Distribution Tax, Fringe Benefits Tax, and MAT.
- Prerequisite Tax: charged on the benefits received by the employees of a company.
Indirect Tax: Taxes that are not collected directly but indirectly by the Government.
- GST: Goods and Service Tax.
Other Taxes: this type includes the miscellaneous revenues, which include:
- Property Tax
- Professional Tax
- Entertainment Tax
- Registration Fees
- Toll tax.
Main Differences Between Zakat and Tax
- Zakat is simple words, is a religious duty of the Muslims, whereas Tax is a compulsory duty of every citizen of the country.
- In Zakat, only the Muslim section of society are the payers, and the Tax has to be paid by everyone irrespective of their religion.
- The amount paid as Zakat is 2.5% of the wealth, whereas the tax percentage varies with its type.
- Changes in the rate of the Zakat are not possible as it is fixed in the Holy Quran, whereas the rate is decided by the government, and therefore they can change it as per their convenience.
- There is no return expected by the Zakat payers as it is paid for the betterment of other Muslims, whereas return in the form of facilities of certain developments is expected by the taxpayers from the government.
- Zakat doesn’t have any geographical limits. If there is an excess amount of tax received, it can be shared with some other countries among the poor or needy Muslims, whereas so much sharing or dispatching takes place with the tax it is utilized within the county in which it is collected.
- The tax has various types, but no such types are in Zakat.
Conclusion
Therefore, it is understood that Zakat is a type of Tax, but it is still very different from the actual tax. Zakat has fixed sources, whereas the tax doesn’t have any fixed sources. Both of them have their importance in a country—especially a country like India where many people from several religions live together. Zakat helps the poor and needy Muslims to have their place and survive in the country, whereas the Tax makes sure the country is developing at a constant rate. Although there is a lot of criticism about the Zakat, still it prevails in most Muslim countries.
References
- https://www.jstor.org/stable/2729788
- https://www.emerald.com/insight/content/doi/10.1108/JIABR-07-2017-0097/full/html