Zakat is the compulsory giving of a set proportion of one's wealth to charity. It is regarded as a type of worship and of self-purification. Zakat is the third Pillar of Islam.
Zakat does not refer to charitable gifts given out of kindness or generosity, but to the systematic giving of 2.5% of one's wealth each year to benefit the poor.
The benefits of Zakat, apart from helping the poor, are as follows:
- Obeying God
- Helping a person acknowledge that everything comes from God on loan and that we do not really own anything ourselves
- Acknowledging that whether we are rich or poor is God's choice
- Learning self-discipline
- Freeing oneself from the love of possessions and greed
- Freeing oneself from the love of money
- Freeing oneself from love of oneself
- Behaving honestly
The 2.5% rate only applies to cash, gold and silver, and commercial items. There are other rates for farm and mining produce, and for animals.
Source: BBC - Five Pillars Of Islam: Zakat (charity).