Each Muslim calculates his or her own zakat individually. For most purposes this involves the payment each year of two and a half percent of one's capital.
In addition to Zakah, a pious person may also give as much as he or she pleases as sadaqa (sadaqah fee sabillilah - Charity for the sake of God) and does so preferably in secret. Although this word can be translated as Voluntary charity' it has a wider meaning. The Prophet said 'even meeting your brother with a cheerful face is charity'.
Zakah is the third pillar of Islam. The main idea behind zakah is that all the wealth that a person has, does not belong to them, it all belongs to Allah, therefore, anyone who is in need should have a share of it. Zakat which is giving as charity a part of your wealth, is a financial act of worship, it is due on the wealth kept in possession for one year. A certain percentage is taken from every kind of property to be given out to the poor to enable them to meet their needs. The Zakah fulfils the poor's needs, and purifies the donors from selfishness.
'Take Sadaqab (alms) from their wealth in order to purify
them and sanctify them with it, and Invoke Allah for them.
Verily! your invocations are a source of security for them,
and Allah is All-Hearer, All-Knower" (9:103)
The Prophet peace be upon him said.
"Never will charity diminish the wealth, rather it augments it."
(Authenticated by: Bukhari)
Thus the Zakah is a means of augmenting the wealth, and purifying the souls from miserliness, stinginess and selfishness. It is a manifestation of social mutual responsibility among the Muslims, that the wealthy among them may sympathize with the poor and the poor among them may love the wealthy. After all, the Zakah is an act of worship dedicated to Allah and a positive response to His command and a means of gaining His pleasure. For most purposes this involves the payment each year of 2.5% of one's excess capital after providing for ones personal and family needs. This small amount is not great enough to be a burden and yet it would make a great difference to someone in need. Pragmatically, this would alleviate poverty and would help to maintain a social security system in society. A generous person can pay more than this amount, though it is treated and rewarded as voluntary charity (Sadaqah). This amount of money is provided to bridge the gap between the rich and the poor, and can be used in many useful projects for the welfare of the community. Zakah is mentioned more than thirty times in the Qur'an, usually in the same breath as Prayer. So important is this pillar that one is not considered a part of the Islamic brotherhood if one ignores this obligation.
The act of Zakah purifies the heart from selfishness, greed, avarice and on the part of the recipient it lessens any feelings of hatred or envy to those who are better off. Additionally, by giving away this amount of money a person becomes more thankful lo God for what they have and it also prevents large divisions in the distribution of wealth so that a balance exists, so that one person is not living extravagantly while another is destitute.
"Alms are for the poor and the needy and those employed
to administer the (funds); for those whose hearts have
been (recently) reconciled (to truth); for those in bondage
and in debt; in the cause of Allah; and for the wayfarer:
(thus is it) ordained by Allah and Allah is full of knowledge
and wisdom." (Qur'an 9:60)