Toll Free An Act to provide for the regulation of chit funds and for matters connected therewith. It extends to the whole of India except the State of Jammu and Kashmir.
It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint, and different dates may be appointed for different States. Explanation - A transaction is not a chit within the meaning of this clause. Act to override other laws, memorandum, articles, etc. Non-prized subscribers to pay subscriptions and obtain receipts Every non-prized subscriber shall pay his subscription due in respect of every instalment on the dates and times and at the places mentioned in the chit agreement and shall, on such payment, be entitled to obtain a receipt from the foreman.
A non-prized subscriber who defaults in paying his subscription in accordance with the terms of the chit agreement shall be liable to have his name removed from the list of subscribers and a written notice of such removal shall be given by the foreman to the defaulting subscriber within fourteen days of the date of such removal: Provided that if the defaulter pays the defaulted instalment with interest at such rate as may be prescribed within seven days of the date of receipt of such notice, his name shall be re-entered in the list of such subscribers.
Personal Finance News. Mutual Funds. Shailesh Menon. Rate Story. Font Size Abc Small. Abc Medium. Abc Large. Getty Images. A chit fund is both a savings and credit product. It bears a pre-determined value and is of a fixed duration, mostly two to three years. Each scheme admits a specific number of members whose monthly contributions adds up to the total value of the chit fund at the end of the term.
Here is a look at how a chit fund works. A joins a chit fund worth Rs 60,, at a monthly subscription fee of Rs 1,, for 60 months. Your legal guide on estate planning, inheritance, will and more. ETPrime stories of the day Under the lens NFRA member under lens for audit gaps in fraud-hit firm; cloud over selection process for regulatory posts. Subscribe to ETPrime. Browse Companies:. Find this comment offensive?
This will alert our moderators to take action Name Reason for reporting: Foul language Slanderous Inciting hatred against a certain community Others. Your Reason has been Reported to the admin. These are considered as safe, as they are regulated under a legal framework and hence the risk is covered completely. Unregistered Chit Funds: These types of chit funds are operated by groups of friends, relatives, peer groups or colleagues. Investment in unregistered funds is considered risky as they do not come under the purview of any law.
In spite of the personal risk associated with participating in an unregistered chit fund, these are very common across India as they are usually formed by close groups of associates and mostly all subscribers are known to each other. Advantages of Investing in Chit Funds When it comes to investing your hard earned money, it is imperative to weigh the pros and cons. Chit fund is a versatile financial product because it works as both an investment and a borrowing tool : when you pay the monthly installment, you invest that money and when you win the auction, you borrow against the subsequent installments future savings.
Chit funds let you borrow a lump sum amount without providing any formal collateral, as opposed to banks or other financial institutions. The rate of interest is also much lower than what a bank would offer. 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 funds are 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. At the societal level, they promote a culture of saving as each member is expected to contribute a fixed amount regularly towards the fund. To some extent, chit funds level the playing field by providing access to money for financially excluded communities.
This is an advantage in a country like India where the bulk of the population works in the informal sector and obtaining a formal loan is difficult for an average person. Lack of financial literacy amongst the general populace means that unscrupulous people can promise huge returns on investments in the name of chit funds which they have no intentions of fulfilling.
They may also use administrative loopholes and gaps in policy to dupe the gullible. Investing in unregistered chit funds is perhaps the biggest risk that you can take with your money.
Unregistered chit funds do not fall under the purview of any law or regulated the way registered chit funds are. The organizers cannot be held to any promises made by them and may misuse the pooled funds. Unregistered chit funds are usually run by people who are known to each other but the organizer may decide to expand the group without checking the creditworthiness of the members leading to a trust deficit amongst the members.
There is also the risk of members defaulting on payments , especially if they have already won a previous round of auction. This deposit is refunded on the successful completion of the chit life cycle. But to avoid paying this amount, a company that runs registered chit funds may run groups that are unregistered. As an investor you have to specifically ensure that the fund that you are investing in is registered so that your money falls under the regulatory safety net.
Do not invest in unregistered chit funds as they are not legally protected or backed by guarantees to regulators. If there is no portal, check the authenticity of the chit fund company and the copy of the chit agreement that you get. Do not invest in a company that has complaints or pending court cases against them. Insist on getting a copy of the chit agreement registered with the state regulator.
0コメント