Skip to main content

Chit Funds

Many be Chits are new to us, but it is not new for our father's generation.

With the personal loans, we need to pay interest and other charges. 

I personally suggest to try a chit.

What are the benefits of Chits?

  • You can withdraw lumpsum amount when needed.
  • You are getting the amount with same as equal bank interest rates.
  • Very short duration.

How chits work with example?

For every chit, there will fix the chit value, tenure/installments and members.

Eg., 10L chit with 50 members for 50 installments.

So, you need to pay, 20,000 per installment.

But, every month, the chit group will held a bidding for those who want a money in that month.

Suppose Mr. Pavan has won the bid, he will be alloted the prized money.

Suppose, the bid starts from 1 lakh, and bid goes till 2 lakhs. The remaining amount 8 lakhs is alloted to the person who won the bid.

Now the bid amount (2 lakhs) will be shared to all the members i.e., 4,000 will be discounted from monthly installment.

Monthly installment = 20,000
Discount = 4,000
The payable amount = 16,000 

In this way, you will always pay the lesser amount than actual till the last person bids.

Tax Implications:

Even though there are no specific guidelines, you are less prone to the tax.

Chit guidelines:

Chit groups are to be registered. Visit for registered chit groups.
All the chit group companies should invest the same amount of chit groups value as a deposit to the government.
The bid/prize amount should not go beyond 40% of chit value.

Some FAQs about Chits

Are chits safe?
Yes, if it registered with the government. Don't trust the local chit groups.

Is it best to take chit?
As said earlier, you will get lumpsum amount for a shorter duration.

What are the risks with Chit groups?
Unlike local chit groups, there are no risks with registered Chit groups.