Chit Schemes | 50K Chit Scheme | myPaisaa

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 What is Chit Fund ? And How does it work?
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What is a Chit Fund?
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•   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 online is 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.

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How do Chit Funds work?
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• 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 dividendthe 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.

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The auction process
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•  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 foremans
  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 months
  allotment. Chit calculators can help you to find
  the average bid amount when you participate in
  the chit auctions conducted by non-banking
  private finance companies.

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Chit Schemes

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•   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 india and 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.

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 Benefits of a chit fund scheme

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• 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 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.

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