Chit Schemes | 50K Chit Scheme | myPaisaa

1. www.mypaisaa.com  What is Chit Fund ? And How does it work?

2. www.mypaisaa.com What is a Chit Fund?   A chit fund is a rotating savings scheme that has been a part of India's financial system for more than a century now. It is also known as chit, chitty or kuree. The word “chit” comes from the Hindi word “kitte” which means “a small piece of paper”. A chit fund onlineis an excellent financial instrument for both – saving and borrowing. As a savings instrument, it gives a good return on investment, and as a borrowing scheme, it can be a reliable source of funds in emergencies and otherwise.

3. www.mypaisaa.com How do Chit Funds work? In a chit fund schemes, people contribute money to a common pool. The money is given to the person selected through a lucky draw or an auction. In an auction allotment system, the person who bids the lowest amount claims the funds. The amount forgone by the winning bidder is distributed among other members after deducting commission from their contributions and other charges from the management. Each member receives a dividend—the portion of their contribution that was not given away in previous drawings or auctions. Even after claiming their share, members must continue contributing to keep playing.

4. www.mypaisaa.com The auction process…  In a chit fund, the person who offers the lowest amount to claim the pot gets the money. This type of fund is called a reverse auction. The amount that each winner bids is then redistributed among all members equally after deducting the foreman’s commission and other charges. The amount received by each member is called a dividend. Even after claiming their prize, winners must continue to pay for their share of each month’s allotment. Chit calculatorscan help you to find the average bid amount when you participate in the chit auctions conducted by non-banking private finance companies.

5. www.mypaisaa.com Chit Schemes   State-run chit funds: These funds are operated by state governments and have minimal chances of losses. Mysore Sales International Limited (MSIL) and Kerala State Financial Enterprises (KSFE) are examples of state-run chit funds.   Unregistered chit funds: In India, unregistered chit funds are common. They are often formed by close groups of associates, and all subscribers are known to each other. Although they're considered risky investments because they don't come under the purview of any law, many Indians participate in them because they're usually operated by familiar faces.   Registered chit funds: These are chit funds that are registered with the Registrar Chit funds in indiaand regulated by state governments under the directives of the Reserve Bank of India guided by the Chit Fund Act of 1982. These are considered to be safe because they have legal protection, so the risk is covered completely.

6. www.mypaisaa.com  Benefits of a chit fund scheme • A chit fund is a financial instrument that can be used to invest in the future by saving money now and borrowing against future savings. Chits let you borrow a lump sum amount without providing any formal collateral, as opposed to banks or other financial institutions.  • The rate of interest on chits is much lower than what a bank would offer, yet you still get the benefit of tax deductions on your monthly installments. From the tax point of view, while the overall income is subject to income tax, the dividends earned per month are neither taxable nor tax deductible. Any losses can be claimed as business losses. • Chit fundsare easy to join, especially if your social collateral is high and money obtained can be used in any way you want: for travel, for medical or business expenses, marriage, education or any other financial emergency.

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