Yes, the remaining amount will serve as the commission money that myPaisaa will charge and as the monthly dividend of Rs 2, that will be received by all members of the chit group.
In this manner, Rohan can acquire the entire amount he needs with immediate effect, hassle-free. Arjun on the other hand can also join the 3 lakh chit fund where he can choose to bid and take the amount towards the end of the term period.
Hence, making it a fruitful investment. When it comes to saving wisely or borrowing heartily, a trustworthy and reliant chit fund can always come to your rescue. So start your savings journey with myPaisaa today! September 29 Chit Funds Chit Funds. There is one financial tool that can benefit, both Rohan and Arjun. The Chit Fund Advantage: This financial tool has the legacy of being birthed in India and having survived since times immemorial. Comments No Responses No comments yet.
Any scheme or arrangement which is based wholly on the essential terms and conditions set out in section 24 or has all the attributes and incidents of a chit fund within the scope and intent of that section shall, notwithstanding that it is called by any other name, be deemed to be a chit fund for the purposes of this Act.
Scheme or arrangement which is deemed only to partake of nature of chit fund prohibited Security The licensing of any company under this Act shall not be regarded as authorising the promotion or formation of any chit fund or the acceptance by that company of any instalment or interest from any subscriber until such security as is provided in the regulations made under this Act in respect of that chit fund has been deposited by the chit fund company in accordance with those regulations.
Receipt of contributions A chit fund company may receive contributions due from intending subscribers at the time of the signing of the agreement pursuant to section 24 3 but if within 14 days after the expiration of one month of the signing of the agreement the chit fund does not commence, the contributions received shall be returned to the subscribers.
Formation of chit funds Every chit fund shall be formed by the execution of a written agreement between the chit fund company on the one part and the intending subscribers severally on the other part. Essential terms and conditions of chit fund As soon as possible after the agreement has been signed by each intending subscriber, the chit fund company shall give the subscriber a written acknowledgment that he is entitled to participate in the chit fund. Meetings of subscribers Minutes of meeting The chit fund company shall enter in a book to be kept for that purpose the minutes of the proceedings of every meeting of the subscribers.
The minutes shall in every case contain the following particulars: a the place, date, time and duration of the meeting; b the names of the subscribers who were present; c the items of business transacted at the meeting, and in the case of a meeting at which a chit fund amount is auctioned, the following additional particulars: i the serial number of the auction; ii the name of each bidder and the amount of each bid; iii the name of the purchaser; iv the amount of the interest.
Alteration of agreement Subject to the provisions of this Act and the regulations made thereunder and subject also to any terms or conditions contained in the agreement as to the matters or the mode in which alterations of the agreement may be made, any alteration of the figures, amounts, dates or other particulars which are not likely to affect the intention or the legal effect of the essential terms and conditions, or any alteration of the additional terms and conditions contained in any agreement, shall be made only at any meeting of the subscribers, duly convened for the purpose, by the votes of a majority, the aggregate of whose contributions is not less than three-quarters of the chit fund amount.
Production of guarantors by purchaser of chit fund amount Every subscriber who is declared the purchaser of a chit fund amount shall, as a condition precedent to the payment of the prize amount to him by the chit fund company, produce at least 2 guarantors to stand surety for the payment of the contributions due from him for the remainder of the chit fund period.
Effect of failing to produce guarantors The refund shall be paid by the chit fund company within 3 weeks from the date of the auction. Substitution of new subscriber for defaulting subscriber who has not purchased any chit fund amount Voluntary reduction of membership in lieu of substitution of new subscriber Liability of defaulting subscriber who has already purchased chit fund amount Transfer of right of chit fund company to recover contributions to be voidable Any transfer made by the chit fund company of its right to recover the contributions payable by subscribers, who have purchased chit fund amounts, shall not defeat or delay the rights of any subscriber who has not purchased a chit fund amount and shall be voidable at the instance of the subscriber if the transfer is likely to defeat or delay the rights of that subscriber under the terms and conditions of the agreement.
Books to be kept by chit fund company Liability of chit fund company to subscribers 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. This is equivalent to a bond document you get when you invest in a LIC bond. It has all the terms and conditions well defined and is a proof that this chit group is operated under regulatory supervision.
If the company you are investing in has other business interests, keep away. Try to know the promoters wherever possible and ensure that they are financially knowledgeable. If anyone asks you to invest in a scheme where you need to add some members to earn higher commissions, stay away from it as it is most likely to be a ponzi scheme.
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