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In Islamic tradition, Khums (Arabic: خمس Arabic pronunciation: [xums], literally 'Fifth') refers to a religious obligation to contribute one-fifth of a certain type of income to charity. The obligatory giving of alms is observed throughout Islam and is one of the Five Pillars of the faith, but the nature of the tax varies considerably between various Islamic traditions.
Khums is paid on all items regarded as ghanima. There are differing legal traditions within Islam about what constitutes ghanima, and thus how far-reaching khums should be. In certain Shia traditions ghanima is defined as the year's profit, including all net income and wealth left over at the end of a year. Within these traditions, Khums involves an annual taxation of one-fifth of all gain, and can be compared to a tithe, or an income tax. Khums includes the Zakat, or alms required as one of the five pillars of Islam.
In Sunni tradition, ghanim is defined as the spoils of war, and the tradition of paying khums has lapsed. However, Sunnis pay Zakat, which involves a one-fortieth taxation of total wealth (and is more akin to a property tax).
History of Khums 
|This section does not cite any references or sources. (February 2013)|
Khums is among the things introduced by Abdul Muttalib, grandfather of the Islamic prophet Mohamed, and it continued in Islam when it was revealed in the Quran. Acting upon a command of God given in a dream, Abdul Muttalib rediscovered the well of Zamzam. He found in it many valuable things that had been buried in a remote past by the Ismailites when they feared that their enemies would usurp them. When Abdul Muttalib found that buried treasure, he gave away one fifth (literally khums) for the way of God and kept the remaining four fifths to himself.
This became a custom in his family, and after the Hijrah of Mohamed the system was incorporated in Islam. So the first khums was not given from spoils of war, but from a buried treasure.
Khums, in the Shia tradition, is applied to the business profit, or surplus, of a business income. It is payable at the beginning of the financial year, though this is regarded as being the time at which the amount becomes clear. The surplus is defined as that amount which is net income of a business, after deducting the annual cost from the gross income. Income includes all earnings, wages, dividend, and, in the eyes of most jurists, includes gifts, prizes, legacies also. However it does not include dowries, or inheritances from immediate family. Annual expenses, which are deducted from income in order to calculate the surplus, would include household expenses, marriage and medical expenses, debts, and in the case of businesses, wages of employees, legal costs, and mandatory payments. Expenses are expected to be reasonable; a person who might reasonably expect to have half his income as surplus, but has less due to profligacy, would still be obliged to pay Khums on the half he is reasonably expected to have. On the other hand, a person who is frugal, and has a larger surplus would be expected to pay Khums on the entire surplus.
The Items eligible for khums are referred to as Ghanima →"الْغَنيمَة" in the Quran. The Arabic word ghanima has three meanings:
- "spoils of war" or "war booty"
- gain or profit
- Livestock, in common usage usually sheep
However one hadith (Imams of Ahlu’l-bayt) lists seven items regarded as ghanima:
- the profit or the surplus of the income.
- the legitimate wealth which is mixed with some illegitimate wealth.
- mines and minerals.
- the precious stones obtained from sea by diving.
- the land which an unbeliever buys from a Muslim.
- the spoils of war.
Sunnis confine the term to cover only
- “whatever of a thing you acquire as spoils of war”.
Interpretations of the verse regarding Ghanima 
Taken in context 
If read in context, "Khums" should only be paid on war booty. The ruling appears in The Qur'an 008:041. Chapter 8 of the Qur'an (Al-Anfal - "spoils of war, booty") begins with the following verse:
- Verse 001:
YUSUFALI: They ask thee concerning (things taken as) spoils of war. Say: "(such) spoils are at the disposal of Allah and the Messenger: So fear Allah, and keep straight the relations between yourselves: Obey Allah and His Messenger, if ye do believe."
The chapter continues to enlighten the reader on how to address various types of situations in the battle-field (as well as lessons to be learnt). The definition of a true believer is given at the beginning. Many of the verses are giving the believers courage (as at the beginning some were afraid), including those verses explaining the favours of Allah on the believers and the reality of the unbelievers. At the same time some are warning the believers from committing evils. Every verse is relevant to the battle-field, and continues to be.
- Verse 041:
YUSUFALI: "And know that out of all the booty that ye may acquire (in war), a fifth share is assigned to Allah,- and to the Messenger, and to near relatives, orphans, the needy, and the wayfarer,- if ye do believe in Allah and in the revelation We sent down to Our servant on the Day of Testing,- the Day of the meeting of the two forces. For Allah hath power over all things."
- For the actual script please see Quran - Chapter Al-Anfal
- The quotations are in the form: verse number(s): summary of verse(s).
- Occasionally the entire verse is given because a summary would be just as long.
Taken in the literal sense 
Some Muslims, typically those who are referred to as Shia, hold the view that since the word Ghanima is used, it therefore implies that the one-fifth tax of Khums also applies wherever gain or profit is involved. "Ghanima" has two meanings as mentioned above; the second meaning is illustrated by the common use of the Islamic banking term "al-ghunm bil-ghurm" meaning "gains accompany liability for loss or risk"
Also in a famous supplication, the supplication after the noon prayer, the person asks God to bestow on him His favors. One of those favors which the person asks is the benefit or gain from every act of righteousness; the word used here is "al-ghanima." →"وَالْغَنيمَةَ مِنْ كُلِّ بِر" This is in accordance with the second meaning of the word.
The Sunni View 
Sunnis that follow one of the four Sunni Schools of Law (Hanafi • Shafi`i • Maliki • Hanbali) for the most part consider Khums to be something that exists, and do not consider it as an innovation. Followers of a contemporary Islamic movement -- Salafism, the adherents of which claim to adhere to the path of the 'as-Salaf aṣ-Ṣāliḥ' (righteous predecessors) consider the payment of Khums to be an innovation—a bid'ah.
The adherents of this movement (sometimes referred to as Salafis) consider it as such, because they find no evidence for its establishment in any of the four major Sunni sources of jurisprudence (Qur'an (the central religious text of Islam) • Sunnah (the observed ways of living and sayings of Muhammad) • Ijma' (consensus of the community of Muslims) • Qiyas (process of analogical reasoning from a known injunction (nass) to a new injunction)).
An example of Khums seen in the Shafi`i school of law is the "Zakat on Treasure Troves". The 1991 English Translation of Umdat al-Salik wa Uddat al-Nasik (Reliance of the Traveller and the Tools of the Worshipper) has this text as the translation in the section H6.2 (ZAKAT ON TREASURE TROVES):
"An immediate zakat of 20 percent is due when one finds a treasure trove that was buried in pre-Islamic times (N: or by non-Muslims, ancient or modern) if it amounts to the zakat minimum (def: h4.2) and the land is not owned. If such a treasure if found on owned land, it belongs to the owner of the land. If found in a mosque or street, or if it was buried in Islamic times, it is considered as a lost and found article (def: k27)."
As for the strict understanding, that Khums is only applicable on Ghanayam (property, movable and immovable,) surrendered by the enemy in any battle or as a result of actual warfare, this is the opinion of only some Sunnis. (For this point one can refer to the quote above, or potentially consult the meaning of ghanimat: tafsir al manar; tafsir qartabi (Volume 4, Page 2840); tafsir razi (Volume 15, Page 164).) The other opinion is illustrated by the addition of the comment "(in war)" by Abdullah Yusuf Ali in his translation of the meaning of the Qur'an, for verse 41 of Surah al-Anfaal (8):
"And know that out of all the booty that ye may acquire (in war), a fifth share is assigned to Allah,- and to the Messenger, and to near relatives, orphans, the needy, and the wayfarer,- if ye do believe in Allah and in the revelation We sent down to Our servant on the Day of Testing,- the Day of the meeting of the two forces. For Allah hath power over all things."
The significance of the brackets around the words "in war" is to show that they are an addition to the original text. This is done to highlight that this verse came down about the "Day of Testing"—the day of the Battle of Badr. This for some Sunnis implies that Khums is only applicable on the spoils of war. With regard to "The Spoils of Battle" this topic is discussed under section O10.0, under the chapter of the same name. This understanding of Khums is mentioned in section O10.4, under the title of "Dividing the First Fifth Taken (Khums)".
- Sanjay Agarwal, Daan and Other Giving Traditions in India, pp. 66-68
- Khums (The Islamic Tax) by Syed Muhammad Rizvi
- Glossary of Islamic Banking Terms
- ...Challenges Facing Islamic Banking by Ibrahim F I Shihata
- The Keys to Paradise, chapter 1, section 2 title "special prayers"