Zakat in Arabic means growth, blessing, and purification (See Lisaan al-‘Arab, 14/358;, 2/399). While Sadaqah comes from the word sidq (sincerity), i.e. it is a sign of sincerity of faith on the part of the person who gives it (See Fath al-Qadeer, 2/399).
With regard to the shar’i definition:
Zakat means worshipping Allah by giving that which He has enjoined of different kinds of zakat to those who are entitled to them, according to the guidelines prescribed in shari’ah. Sadaqah means worshipping Allah by giving money without that being made obligatory in shari’ah. The word sadaqah is sometimes used to refer to obligatory zakat.
With regard to the difference between zakat and sadaqah, it is as follows:
1 – Zakat is enjoined in Islam on specific things, which are: gold, silver, crops, fruits, trade goods and an’aam livestock, i.e., camels, cattle and sheep. With regard to sadaqah, it is not obligatory on any kind of wealth, rather it is what a person can give, without any specific limits or guidelines.
2 – Zakat is subject to the conditions that one full Hijri has passed since acquiring the wealth, and that the wealth meet the minimum threshold (nisab), and it is a specific portion of wealth. Sadaqah is not subject to any conditions, and it may be given at any time, in any amount.
3 – Allah has enjoined that zakat is given to certain types of people, and it is not permissible to give it to anyone else. They are the people mentioned in the verse (interpretation of the meaning):
“As-Sadaqat (here it means Zakat) are only for the Fuqara’ (poor), and Al‑Masakeen (the poor) and those employed to collect (the funds); and to attract the hearts of those who have been inclined (towards Islam), and to free the captives; and for those in debt; and for Allah’s Cause (i.e. for Mujahidoon — those fighting in a holy battle), and for the wayfarer (a traveller who is cut off from everything); a duty imposed by Allah. And Allah is All-Knower, All-Wise” [Al-Quran, Surah al-Tawbah, verse 60].
With regard to sadaqah, it may be given to those mentioned in the verse on zakat and to others.
4 – Whoever dies and owes zakat, his heirs must pay it from his wealth, and that takes precedence over the will (wasiyah) and inheritance. As for sadaqah, there are no such obligations with regard to it.
5 – The one who withholds zakat is to be punished, as it says in the hadith narrated by Muslim in his Sahih (987) from Abu Hurayrah (may Allah be pleased with him) who said:
“The Messenger of Allah (peace and blessings of Allah be upon him) said: “There is no owner of treasure who does not pay his zakat, but it will be heated in the Fire of Hell and made into plates with which his sides and forehead will be branded until Allah passes judgment between His slaves on a Day the length of which will be like fifty thousand years, then he see shown his path and whether it leads to Paradise or to Hell. And there is no owner of camels who does not pay zakat on them, but a soft sandy plain will be prepared for him and they will be made to step on him. Every time the last of them has gone the first of them will return until Allah passes judgment between His slaves on a Day the length of which will be like fifty thousand years, then he will see his path and whether it leads to Paradise or to Hell. And there is no owner of sheep who does not pay zakat on them but a soft sandy plain will be prepared for him, and he will find none of them missing, with twisted horns or without horns or with broken horns, and they will be made to gore him with their horns and trample him with their hooves. Every time the last of them has gone the first of them will return until Allah passes judgment between His slaves on a Day the length of which will be like fifty thousand years, then he will see his path and whether it leads to Paradise or to Hell…”
With regard to sadaqah, the one who does not pay it will not be punished.
6 – According to the four schools of law, it is not permissible to give zakat to one’s ascendants or descendants. Ascendants include one’s mother, father, grandfathers, and grandmothers; descendants include one’s children and their children. Sadaqah may be given to one’s ascendants and descendants.
7 – It is not permissible to give zakat to one who is rich or who is strong and able to earn a living.
It was narrated that ‘Ubayd-Allah ibn ‘Adiyy said: “Two men told me that they came to the Prophet (peace and blessings of Allah be upon him) during the Farewell Pilgrimage when he was distributing the zakat and asked him for some of it. He looked them up and down, and saw that they were strong and able-bodied. He said, “If you wish, I will give you some, but those who are rich or strong and able to earn have no share of it.” [Narrated by Abu Dawood, 1633; al-Nasa’i, 2598; classed as sahih by Imam Ahmad and others], [See Talkhis al-Habir, 3/108].
Sadaqah may be given to those who are rich and those who are strong and able to earn.
8 – In the case of zakat, it is better for it to be taken from the rich of land and given to their poor. Many scholars are of the view that it is not permissible to send it to another country unless that serves an interest. But sadaqah may be spent on those who are near and those who are far.
9 – It is not permissible to give zakat to kuffar and mushrikeen. Sadaqah may be given to kuffar and mushrikeen. Allah says (interpretation of the meaning):
“And they give food, in spite of their love for it (or for the love of Him), to the Miskeen(the poor), the orphan, and the captive” [Al-Quran, Surah, al-Insan, verse 8].
Al-Qurtubi said: In dar al-Islam (the Muslim lands), a captive could only be a mushrik.
10 – It is not permissible for a Muslim to give zakat to his wife. Ibn al-Mundhir narrated that there was scholarly consensus on this point. But sadaqah may be given to one’s wife.
These are some of the differences between zakat and sadaqah.
The word sadaqah may be applied to all kinds of good deeds. Al-Bukhari (may Allah have mercy on him) said in his Sahih: “Chapter: every good deed is a charity” then he narrated from Jabir ibn ‘Abd-Allah (may Allah be pleased with him) that the Prophet (peace and blessings of Allah be upon him) said: “Every good deed is a charity.”
Ibn Battal said: This hadith indicates that every good thing that a person does or says is recorded for him as an act of charity.
Al-Nawawi said: The Prophet’s words “Every good deed is a charity” means that it is like charity in reward.
And Allah knows best.