Literally Zakat means Blessing, purification, increase and goodness. It is so called as it blesses the wealth from which it is taken and protects it from misfortunes. Ibn Taimiah said, “The soul of one who gives Zakat is blessed and so is his wealth.”
Zakat is defined as “A determined portion taken from wealth and allocated to those deserving it, by a Qur’anic injunction.” Sometimes Zakat is referred to in the Holy Qur’an as Sadaqah (alms). The Qur’an says, “Of their goods take alms, that so thou mightest purify and sanctify them; and pray on their behalf, verily thy prayers are a source of security for them.” (Surah Al-Taubah, No.9, Verse: 103). In an authentic hadith, the Prophet (peace be upon him) said to his Companion Mu`adh, when he was sent to Yemen as governor, “Tell them that Allah has made Zakat obligatory for them, that it should be collected from the rich and distributed among the poor.”
Every Muslim who possesses a zakat payable amount (Nisab) for one luner year has to pay Zakat (2.5% of Nisab).
Source: Zakat Guide