This is a brief post to make a clear distinction between zakat and sadaqah. Zakat is often confused for sadaqah(charity) while the two are completely different.
Zakat, which is the 3rd pillar, is Islam means growth/purification. Zakat is a fundamental part of Islam. It is a purifying act that is good for the economy as a whole. It's important to mention that it's not a tax system where everybody pays some expenses in return of the public service that the government offers. It is not either a system of social insurance where the rich pays some installments to guarantee some services in cases of any damage.
The philosophy behind this act has multi dimensions. Al-Zakat considers that rich people's properties are not absolutely theirs. Unless they pay the rights of the poor, they are considered transgressors. It is also a yearly reminder of the fact that what we earn and what we have is not really ours. It is a gift from God. We shoulder certain responsibility towards this gift. Because socially and legally, what we have is ours, we are prone to get attached to what we have and forget that we are just passing by. Al-zakat emphasizes that fact indirectly. The awareness of that dimension protects the individual human being from feeling superior. This awareness may even raise feelings of overall responsibilities for what seemingly are her/his properties.
"And there are those who bury gold and silver and spend it not in the Way of Allah: announce unto them a most grievous penalty. On the Day when heat will be produced out of that (wealth) in the fire of Hell, and with it will be branded their foreheads, their flanks, and their backs, "This is the (treasure) which ye buried for yourselves: taste ye, then, the (treasures) ye buried!" (At-Tawbah: 34-35)
There are two types of . Zakat Fitr is a one payment that is made once in every calender year at any time between the first day of the month of Ramadan and the first day of Shawaal. All Muslims are obligated to pay this, regardless of their age, status or wealth. The amount of zakat payable is approximately 3kg of staple food in the relevant country or an amount of money that is equivalent to the price of the food. Zakat al-Mal is an annual payment based on the amount of wealth owned by a Muslim individual or organization.
Sadaqah is a voluntary act of giving alms/charity fisabililah(for the sake of Allah). Sadaqah is not limited to giving of money or part of our wealth, every Muslim can therefore earn rewards from Allah. Sadaqah is an easy way to increase our iman. Every Muslim whether poor or wealthy can give sadaqah at all times. Sadaqah can come in many shapes and forms i.e. a smile, a kind act, cooking a meal, etc.
“The likeness of those who spend for Allah’s sake is as the likeness of a grain of corn, it grows seven ears every single ear has a hundred grains, and Allah multiplies (increases the reward of) for whom He wills, and Allah is sufficient for His creatures’ needs, All-Knower).” (Qur’an, 2:261)
“Those who (in charity) spend of their goods by night and by day, in secret and in public have their reward with their Rabb (only God and Sustainer). On them shall be no fear nor shall they grieve.” (Qur‘an, 2:274)
“…that which you give for charity, seeking the Countenance of Allah, (will increase); it is those who will get a recompense multiplied.” (Qur’an, 30:39)
Information for this post was gathered from the following websites: