"Khums literally means one-fifth or 20%. In Islamic legal terminology, it means one-fifth of the items which a person acquires as wealth.
However, there are some people who interpret the word ghanimah as whatever one acquires as spoils of war, thus confining the obligation of khums to the spoils of war only. This interpretation is based on ignorance of the Arabic language, the history of khums, the Islamic laws and of the interpretation of the Koran. Not a single sect of Islam confines the meaning of ghanimah to the spoils of war.
The Koran says: "And know that whatever thing you acquire in war, a fifth (khums) of it is for God and for the Prophet and for the near of kin (ahl al-bayt); and the orphans and needy and travellers" (8: 41)
In Arab, the system of khums was introduced by Abdul Muttalib, the grandfather of the Prophet, and it was continued in Islam. When Abdul Muttalib discovered the well of Zamzam, he also found a hidden treasure, which was buried in past by the Ismaelites when they feared that their enemies would usurp them. Abdul Muttalib gave away its one-fifth (khums) in the way of God and kept the remaining four-fifth to himself. Then it became a custom in his family; and after the hijra of the Prophet, the same system was incorporated in Islam. Thus the first khums was not given from the spoils of war, but from a buried treasure, which Abdul Muttalib acquired.
When the Prophet sent Amr bin Hazm to Yemen, he wrote instructions for him in which, among other things, he says, "...to gather the khums of God from the gains of Yamenis. (Ibn Khaldun, Tarikh, Beirut, 1971, 2:54; Ibn Kathir, al-Bidayah wa'n-Nihayah, Beirut, 1966, 5:76-77; Ibn Hisham, Sirah, Beirut, 1975, 4:179). And when the tribe of Bani Kilal of Yamen sent its khums to the Prophet, the latter acknowledges it by saying, "Your messenger has returned and you have paid the khums of God from the gains (Abu Ubayd, al-Amwal, Beirut,1981. p.13; al-Hakim, Mustadrak, Hyderabad, 1340 AH, p. 395. For more references, see Jafar Murtada al-Amili, al-Sahih fi Sirati'n-Nabi, Qum, 1983, 3:309.) It is interesting to note that the Bani Kilal obeyed the Prophet's order and sent the khums of its gains to him while no war had taken place between the Muslims of Yamen and the unbelievers. This is a clear indication that khums was not restricted to the spoils of war.
The importance given by the Prophet on the issue of khums can also be seen in his advice to the delegation of Bani Abdul Qays. It seems that Bani Abdul Qays, a branch of Rabiah was not a very strong tribe. Moreover, in order to travel to Medina, they had to cross an area inhabited by the Muzar tribe which was against the Muslims. Consequently, the Bani Abdul Qays could not travel safely to Medina except during the months in which warfare was forbidden according to the Arab custom.
Once a delegation from Bani Abdul Qays came to Medina and said to the Prophet, "We cannot come to you except in the haram months when warfare is forbidden, and there are between us and you the unbelievers of Muzar. Therefore, please give us some advice that we may give to those whom we have left behind and that we may enter the Paradise (by acting on it ourselves)." The Prophet advised them to believe in One God, establish prayer, pay zakat, fast in the month of Ramzan, and "to pay khums (one-fifth) of whatever you gain." (Bukhari, 4:213; Abu Ubayd, al-Amwal, p. 13). This has also been recorded by Muslim, Nisai, Musnad and Tirmidhi. The circumstances of the Bani Abdul Qays -- they were weak and small in numbers, and were thus prevented from traveling safely to Medina -- leaves no room for interpreting the application of khums in the above hadith on spoils of war exclusively.