"Chit" means a transaction whether called chit, chit fund, chitty, kuri, fraternity fund or Rotating Saving and Credit Associations/Institutions (ROSCAs) or by any other name by or under which a person enters into an agreement with a specified number of persons that every one of them shall subscribe a certain sum of money (or a certain quantity of grain instead) by way of periodical instalments over a definite period and that each such subscriber shall, in his turn, as determined by lot or by auction of by tender or in such other manner as may be specified in the chit agreement, be entitled to the net chit amount.
Rotating Savings and Credit Associations are financial instruments in which the members are a trusted social network that includes friends, relatives, family, neighbours, and colleagues. The members agree to contribute an equal amount of money, typically on a monthly basis for a defined period. At the end of each cycle, a different member picks up the lump sum. ROSCA is a global phenomenon, and these groups have been documented around the developing world by different names. In India, it’s called chit fund.
“Chit business” means the business of conducting a chit.
The rate of interest for bank loans is usually very high when compared to availing a chit of the same amount. For any personal or business need, if planned in advance, it is always better to join a chit and bid early rather than take a bank loan.
Registered chit funds are the ones that are registered with the Registrar of Firms Societies and Chits. It is a type of NBFC which regulates under sec 2 of Chit fund Act, 1982. It works on the concept of saving and borrowing. The government appoints the Chit Registrar under section 61 of the Chit Fund Act, 1982 to control chit funds. During the registration, the owner has to pay a security deposit with the registrar of chits, which is 100% of the chit value. The security deposit can only be taken out when the chit fund group closes, and every member is paid what’s due to them. Thus, this regulation protects the money invested by the subscribers.
Yes! Jayapriya Chit fund is your trustworthy, safe and reliable companion to help you reap maximum benefits from investing in chits.
The chit group vary from 1 lakh to 2.5 crores.
The duration of the chits are normally 20 months, 25 months, 30 months, 40 months and 50 months.
A subscriber can participate in not more than three chits in the same chit group. This restriction may help to reduce discount issues among subscribers.
- Chit fund is a unique financial concept, which has flexibility to borrow or save. By paying one-month instalment amount, a person can get to borrow from the chit value, by offering a discount not exceeding the maximum limit ascertained in the chit agreement.
- In a chit value of Rs.100000/- for a period of 20 months, first the subscriber can get an amount of 70000/-by paying only Rs.5000/- and remaining instalments he pays over a period of 20 months. The rate of borrowing is much cheaper than several other financial schemes.
- The non-prized subscriber who is a saving member up to the last instalments gets dividend which is comparatively higher than the interest that are accrued by way of recurring deposit scheme.
- The purpose of drawing the net chit amount need not be disclosed. It can be used for any need by the member for Example: House construction, Marriage, Education, Expansion of business, buy a Computer or any other purpose at his discretion.
Since the successful bidder, in the initial few months is allowed to use the net chit amount, for his personal use ahead of others, he offers to take the chit amount at a discount, after calculating interest and cost of funds. It may be noted that a successful bidder withdraws more money from the company, than he had already paid, and repays the excess amount withdrawn, in periodic instalments until completion of the chit period. Rate of interest will be lower as compared with all other schemes.
All the dividends receivable till date of joining the group are earned by the member joining a vacant chit.
"Chit agreement" means the document containing the articles of agreement between the foreman and the subscribers relating to the chit
“Gross Chit amount” means the sum-total of the subscriptions payable by all the subscribers for any instalment of a chit without any deduction of discount or otherwise
“Net chit amount” means the difference between the gross chit amount and the discount, and in the case of a fraction of a ticket means the difference between the gross chit amount and the discount proportionate to the fraction of the ticket, and when the net chit amount is payable otherwise than in cash, the value of the net chit amount shall be the value at the time when it becomes payable.
“Foreman” means the person who under the chit agreement is responsible for the conduct of the chit and includes any person discharging the functions of the foreman under section 39.
“Subscriber” includes a person who holds a fraction of a ticket and also a transferee of a ticket or fraction thereof by assignment in writing or by operation of law.
- Individuals who is above 18 Years with necessary id proofs.
- Partnership Firms
- Private and Public Limited Companies
- HUF
“Ticket” means the share of a subscriber in a chit.
Auction is a procedure for identification of the non-prized subscriber who wants to take a chit amount at the highest permissible discount. All non-prized subscribers who have paid their instalments up to date are allowed to participate in the auction for bidding up to the highest auction discount, within a period of ten minutes allowed for each auction.
Subscribers are physically present in the Auction Hall. Participants pronounce orally their discount amount that they want to forego. Among the participants, the successful Bidder is confirmed to the highest discount amount at the end of auction.
An online auction is a service in which auction users or participants can bid the chit amount via the Internet. Virtual auctions facilitate online activities between organiser and participants in different locations or geographical areas though a previously shared link.
When more than one non-prized subscriber wants to take the chit at the same discount, the chit numbers (coins) of all such non-prized subscribers are put in a container and the successful bidder is identified by removing one number (token coin) from the said container. The procedure is known as lot or lottery.
The first Public Auction of the Chit will be intimated thro’ a Welcome Letter to each and every Subscriber in the Group. It carries all information about the Gross Chit Amount, Group No, Ticket No, Date of Auction and Time with due date for payment of Subscription amount, etc., Auction is conducted for10 minutes only, there is maximum ceiling of 40% in bidding on gross chit amount, subscriber who is willing to Bid the Chit, can participate in the Auction in Person or Giving bid offer in advance or Authorizing representative with authorization letter. Every such draw shall be conducted in accordance with the provisions of the chit agreement and in the presence of not less than two subscribers present in person or through video conferencing duly recorded by the foreman.
If a Chit subscriber who is not able to attend the Auction can send their required amount through quotation is known as Tender. At the time of auction subscriber’s tender will be placed in auction and it will be the base amount for bidding.
Online Payment directly to the subscriber’s bank account is the current mode of payment for the safe and secured transaction.
A customer who has taken his chit or to whom the net chit amount is paid is called a bidded subscriber.
A customer who has not lifted his chit or to whom the net chit amount has not been paid yet is called a non-bidded subscriber.
Company replaces the defaulter with one of the vacancy subscriber or by taking over itself to continue the auction successfully. In the background, we follow our debt recovery protocol to recover the funds from the defaulter.
Auction discount minus company commission (5% of chit value) is the total group discount. Total group discount is distributed equally amongst all the subscribers. This discount so distributed is deducted from the next instalment payable by the subscriber.
For the proper conduct of the chit the prized subscriber is requested to furnish necessary securities to the satisfaction of the foreman of the payment of the future instalment due.
After a successful bidder is declared, they would have to provide satisfactory sureties/guarantors based on the future liability as specified in the byelaws. After the proper scrutiny of surety documents, the payment shall issue to the bidder.
Yes, GST is applicable on chit fund commission income. It will take part in aggregate turnover. Business establishments can claim GST input for the same.
Dividend is neither taxable nor tax deductible. Overall loss is allowed as business expenditure u/s 37.Overall gain is taxable as income from other sources.
Penalty is collected from all subscribers who make delayed payment of periodic instalments. In case a non-bidded subscriber defaults for a continuous period of 4 to 5 months, such subscriber will be removed. In such Breach of contract the actual amount paid by him in the chit less expenses will be repaid to such defaulting subscriber. In case a bidded subscriber defaults, a penalty of certain% per month will be collected and discount will also not be paid to such defaulting bidded subscriber. Legal action will be initiated against the said defaulting bidded subscriber and his guarantors in court of law, for recovery of all dues.
We always make sure to pay our subscribers on time all year round. Making prompt payment is our strength where subscribers always come back with repeat investment with us.
Non-payment of the chit instalment by the due date will result in late-fees. Repeated delays in subscriptions or other irregularities may adversely affect your creditability with the company and even result in forfeiture of your dividend or cancellation of your chit, as per the terms of the chit agreement.
Subscriber must know that only non-bidded chits can be cancelled. bidded chits can be pre-matured only on the condition that all pending and future instalments in the chit are paid in advance. A non-bidded subscriber can withdraw their subscription by a written request to the Company. The Company will, as per the bye-laws and chit-agreement, make the payment after the deductions, on actual subscribed amount.
