Zakat is due at 2.5% on net zakatable wealth held for one lunar year, when it exceeds the Nisab threshold. Silver Nisab catches more wealth and is the more common basis in Pakistan.
Zakat is a 2.5% annual purification charge on the wealth a Muslim has held in productive or liquid form for one full lunar (Hijri) year - cash in hand, bank balances, gold and silver, business inventory, financial investments, and receivables you reasonably expect to collect. The categories that don't count are equally important: your primary residence, your daily-use vehicle, household furniture and appliances, books, professional equipment used in your trade, and any wealth held for less than a lunar year.
The "held for a lunar year" rule - hawl - is the source of much confusion. Practically, most people pick a fixed date each year (often 1 Ramazan or the date they crossed Nisab the first time) and snapshot their wealth then. As long as wealth remained above Nisab continuously throughout the year, the lunar-year condition is met even if individual deposits and withdrawals moved through the account.
The Nisab is the minimum wealth threshold below which Zakat isn't obligatory. The Sunnah specifies two bullion-based measures: 87.48 grams of gold or 612.36 grams of silver. Because silver has fallen dramatically against gold since the Prophet's (peace be upon him) time, the silver Nisab is roughly one-tenth of the gold Nisab in PKR terms. The majority opinion among Pakistani Ulema - including Mufti Taqi Usmani and Mufti Munib-ur-Rehman - is that silver Nisab should be used because it's more inclusive and benefits the poor more.
If you have a mix of gold, silver, cash, and investments, silver is also the only valid Nisab (you can't selectively apply gold Nisab just to your gold and silver Nisab to your cash). Pick one basis and apply it to your total zakatable wealth.
Cash PKR 80,000 + bank savings PKR 450,000 + gold (10 tolas, ≈116.6g at PKR 30,000/g) PKR 3,498,000 + PSX portfolio PKR 800,000 + business receivables PKR 120,000 = PKR 4,948,000 zakatable. Liabilities (credit card due, supplier dues) PKR 250,000.
Net zakatable wealth = PKR 4,698,000. Silver Nisab at PKR 360/g × 612.36g ≈ PKR 220,450. Wealth easily exceeds Nisab. Zakat at 2.5% = PKR 117,450 payable.
Zakat deducted at source by a Pakistani bank under the Zakat & Ushr Ordinance 1980 is allowed as a straight deduction from your taxable income for the year - not a tax credit, a deduction (Clause 60 of Part I of the Second Schedule). Get the deduction certificate from your bank and enter it in the credits section of your return; it reduces your slab base.
Voluntary Zakat - what you pay directly to recipients or registered charities rather than via the bank - is treated differently. It doesn't get the Section 60 deduction automatically; instead it may qualify as a charitable donation under Section 61, which gives a tax credit (not a deduction) computed on your average tax rate. The Section 61 credit only applies to donations to FBR-approved institutions listed in Schedule II - check the FBR website before claiming.
To opt out of the bank's automatic deduction on religious grounds (Shia, Ahle Hadith, or other valid reasons), submit form CZ-50 declaration to your bank before 1 Ramazan. The declaration is valid for one year and must be renewed annually.