What Are the Degrees of Islam?
Question

Are there degrees of Islam, and what are they?
Praise be to Allah.Yes, there are three degrees of Islam, which are: Islam, iman and ihsan. Each of them has a meaning and certain pillars or essential parts. 
The first degree is Islam 
Islam, which in Arabic means submission. In Sharee’ah terminology, its meaning varies according to usage, and it may mean one of two things: 
(1) When the word is used on its own and is not accompanied by the word iman (faith, belief), it refers to the religion as a whole, including both major and minor issues of belief, words and deeds, as in the verses where Allah says (interpretation of the meaning):
“Truly, the religion with Allah is Islam.” [Aal ‘Imran 3:19] 
“and have chosen for you Islam as your religion.” [Al-Ma’idah 5:3] 
“And whoever seeks a religion other than Islam, it will never be accepted of him.” [Aal ‘Imran 3:85]
Hence some of the scholars defined it as meaning: Submitting to Allah by affirming that He is One (Tawhid) and submitting to Him by obeying Him and disavowing shirk and its people. 
(2) When it is used in conjunction with the word iman (faith, belief), in which case it refers to outward deeds and words , as in the verses where Allah says (interpretation of the meaning):
“The bedouins say: ‘We believe.’ Say: ‘You believe not but you only say, “We have surrendered (in Islam),”for Faith has not yet entered your hearts’…” [Al-Hujurat 49:14]
In Saheeh al-Bukhaari (27) and Saheeh Muslim (150) it is narrated from Sa’d ibn Abi Waqqas that the Messenger of Allah (peace and blessings of Allah be upon him) distributed (Zakah) amongst (a group of) people while Sa’d was sitting there. Sa’d said: But the Messenger of Allah (peace and blessings of Allah be upon him) left a man who I thought the best of them all, and did not give him anything. I said, “O Messenger of Allah, why did you leave out So and so? By Allah I regard him as a faithful believer.” The Messenger of Allah (peace and blessings of Allah be upon him) said: “Or (merely) a Muslim.” I remained quiet for a while, but could not help repeating my question because of what I knew about him. I said, “O Messenger of Allah, why did you leave out So and so? By Allah I regard him as a faithful believer.” The Messenger of Allah (peace and blessings of Allah be upon him) said: “Or (merely) a Muslim.” I remained quiet for awhile, but could not help repeating my question because of what I knew about him. I said, “O Messenger of Allah, why did you leave out So and so? By Allah I regard him as a faithful believer.” The Messenger of Allah (peace and blessings of Allah be upon him) said: “Or (merely) a Muslim. I give to one person even though another is dearer to me, for fear that he might be thrown on his face in the Fire.” 
With regard to the Prophet’s words “or (merely) a Muslim,” when Sa’d (may Allah be pleased with him) said to him, “By Allah I regard him as a faithful believer” mean: You do not know about his faith, all you can see is his Islam in the sense of his outward actions. 
The second degree is iman (faith)
Iman (faith), which in Arabic means belief which is committed to submission. In Islamic terminology its meaning varies according to usage and it may mean one of two things: 
(1) When the word is used on its own and is not accompanied by the word Islam, it refers to the religion as a whole, as in the verses where Allah says (interpretation of the meaning):
“Allah is the Wali (Protector or Guardian) of those who believe. He brings them out from darkness into light.” [Al-Baqarah 2:257] 
“and put your trust in Allah if you are believers indeed.” [Al-Ma’idah 5:23]
And the Prophet (peace and blessings of Allah be upon him) said: “No one will enter Paradise except the believers.” (Narrated by Muslim, 114)
Hence the Salaf were unanimously agreed that iman means “affirming in the heart – which includes actions of the heart – and saying with the tongue and acting with one’s physical faculties. It increases by doing acts of obedience and decreases by committing sin.” 
Hence Allah limited the word iman to those who adhere to His religion in full, inwardly and outwardly, when He said (interpretation of the meaning): 
“The believers are only those who, when Allah is mentioned, feel a fear in their hearts and when His Verses (this Qur’an) are recited unto them, they (i.e. the Verses) increase their Faith; and they put their trust in their Lord (Alone);
Who perform As-Salaah (Iqaamat-as- Salaah) and spend out of that We have provided them.
It is they who are the believers in truth. For them are grades of dignity with their Lord, and forgiveness and a generous provision (Paradise)” [Al-Anfal 8:2-4]
And Allah referred to iman as including all of that when He said (interpretation of the meaning): 
“but Al-Birr is (the quality of) the one who believes in Allah, the Last Day, the Angels, the Book, the Prophets and gives his wealth, in spite of love for it, to the kinsfolk, to the orphans, and to Al-Masaakeen (the poor), and to the wayfarer, and to those who ask, and to set slaves free, performs As-Salaah (Iqaamat-as-Salaah), and gives the Zakât, and who fulfil their covenant when they make it, and who are patient in extreme poverty and ailment (disease) and at the time of fighting (during the battles). Such are the people of the truth and they are Al-Muttaqoon (the pious.” [Al-Baqarah 2:177]
And the Prophet (peace and blessings of Allah be upon him) referred to iman as including all of that in the hadith about the delegation of ‘Abd al-Qays which is narrated in Saheeh al-Bukhari (53) and Saheeh Muslim (17), where he said: “I enjoin you to believe in Allah alone. Do you know what belief (or faith) in Allah alone is?” They said: “Allah and His Messenger know best.” He said: “To bear witness that there is no god but Allah and that Muhammad is the Messenger of Allah, to establish regular prayer, to pay zakaah, to fast Ramadaan, and to give one-fifth of the war-booty (the khums).” 
The Prophet (peace and blessings of Allah be upon him) described fasting the month of Ramadan out of faith and in the hope of reward as being part of faith; he also said the same concerning spending the night of Laylat al-Qadar in prayer, fulfilling one's trusts, jihad, Hajj, attending funerals, etc. In Saheeh al-Bukhaari (9) and Saheeh Muslim (35) it says: “Faith has seventy-odd branches, the highest of which is saying Laa ilaaha ill-Allah (there is no god except Allah) and the least of which is removing a harmful thing from the road.” It would take too long to mention all the verses and hadiths that speak of this topic. 
(2) When the word iman is used in conjunction with the word Islam. In this case it is understood as referring to inward beliefs as in the hadith of Jibril etc., and as in the hadith of the Prophet (peace and blessings of Allah be upon him) concerning the funeral du’aa’: “O Allah, whomever among us you cause to live, cause him to live in Islam, and whomever among us you cause to die, cause him to die in faith.” Narrated by al-Tirmidhi, 1-24; he said it is hasan saheeh. It was also classed as sahih by al-Albani, as stated in Sahih Sunan al-Tirmidhi, 1/299. That is because physical actions can only be accomplished during life, but when one is dying all that is left is the words and actions of the heart.
Difference between Islam and Iman
The point is that when either word, iman or Islam , is used alone, there is no difference between them, rather each of them when used alone refers to the entire religion. If there is any difference between them, then the word Islam refers to outward physical actions and the word iman refers to inward actions of the heart. This is what is indicated by the hadith of Jibreel which was narrated by Muslim in his Sahih (8) from ‘Umar ibn al-Khattab who said: 
One day when we were with the Messenger of Allah (peace and blessings of Allah be upon him), there appeared before us a man whose clothes were exceedingly white and his hair was exceedingly black, and there were no signs of travel on him. No one among us recognized him. He came and sat down by the Prophet (peace and blessings of Allah be upon him) and rested his knees against his and placed the palms on his hands on his thighs. He said: “O Muhammad, tell me about Islam.” The Messenger of Allah (peace and blessings of Allah be upon him) said: “Islam is to testify that there is none worthy of worship except Allah and that Muhammad is the Messenger of Allah, to establish regular prayer, to pay zakah, to fast Ramadan and to go on pilgrimage to the House if you are able to.” He said: “You have spoke the truth.” And we were amazed at his asking that and saying that he had spoken the truth. Then he said: “Tell me about iman (faith, belief),” He said: “It means believing in Allah, His angels, His Books, His Messengers, and the Last Day, and believing in al-qadar (the divine will and decree), both good and bad.” He said: “You have spoken the truth.” He said: “Tell me about ihsan.” He said: “It means worshipping Allah as if you can see Him, and although you cannot see Him, He can see you.” He said: “Tell me about the Hour.” He said: “The one who is being asked does not know more about it than the one who is asking.” He said: “Then tell me about its signs.” He said: “The slave-girl will give birth to her mistress, and you will see the barefoot, naked, destitute herdsmen competing in constructing lofty buildings.” Then he departed and I stayed for a while. Then he said to me: “O ‘Umar, do you know who the questioner was?” I said: “Allah and His Messenger know best.” He said: “That was Jibreel, who came to teach you your religion.” 
The third degree is ihsan
Ihsan means doing something well, perfectly and sincerely. In Islamic terminology its meanings vary according to usage and it may mean one of two things: 
(1) When it is used alone and is not mentioned in conjunction with Islam or iman, it refers to the religion as a whole, as stated above with regard to the words Islam and iman.
(2) When it is used in conjunction with either or both of the words Islam and iman, the meaning is perfecting one’s outward and inward deeds. The Prophet (peace and blessings of Allah be upon him) explained it in a manner that no other created being apart from him (peace and blessings of Allah be upon him) could have explained it, because of the gift of concise speech that Allah bestowed upon him. He (peace and blessings of Allah be upon him) said: “It means worshipping Allah as if you can see Him, and although you cannot see Him, He can see you.” This is the highest degree of Islam. Those who attain this are the foremost in doing good, the ones who will be closest to Allah in the highest degrees of Paradise.
Categories of ihsan
The Prophet (peace and blessings of Allah be upon him) has told us that the degree of ihsan is of two categories, one of which is higher than the other. 
The first position is the higher of the two: This means worshipping Allah as if you can see Him. This means that a person acts as if he can see Allah in his heart, so his heart is filled with light and the matters of the unseen become almost like that which is visible (i.e., it becomes very real to him). Whoever worships Allah with awareness of His nearness and turning to Him and acts as if he is before Allah and looking at Him is bound to fear Him and venerate Him. 
The second position is that of sincerity and awareness that Allah is always watching. This means that a person acts with an awareness that Allah can see him and is close to him. If a person bears this in mind and acts accordingly, then he will be sincere towards Allah because this awareness will prevent him from paying attention to anyone other than Allah or doing anything for the sake of anyone else. If a person achieves this position, it will become easy for him to reach the position described above. Hence the Prophet (peace and blessings of Allah be upon him) said, “and although you cannot see Him, He can see you.” If a person truly understands when worshipping Allah that He can see him and knows all his deeds, hidden and visible, inward and outward, and that nothing is hidden from Him, then it will be easy for him to move from the lower position to the higher, which is the constant awareness that Allah is close to His slave and is with him, because it is as if he can see Him. We ask Allah of His great bounty. 
For more, see answers No. (219 ), (14055 ), and (208110 ).
Reference:

Ma’arij al-Qubul by Shaykh Hafizh al-Hakami, 2/20-33, 326-328;
Al-Majmu’ al-Thamin by Ibn Uthaymeen, 1/49, 53.’ 
Jami’ al-‘Ulum wa’l-Hikam by Ibn Rajab al-Hanbali, 1.106.