Frequently Asked Questions
What are the various chit groups in Think Chits?
What are the modes of payment?
You can make payments through Demand Drafts, Cheques or Online transfers. We do not accept third party cheques.
What is purpose of bidding?
The members who are in need of money will be participating in the auction for bidding. The purpose of bidding is to declare the successful bidder who gives the highest bid amount (Not exceeding maximum limit) within the specified auction time
Why is there a need for sureties or guarantors?
The prized subscriber takes a loan advance from the chit fund company, with an understanding to repay the future instalment on time, so that the foreman is able to pay the prized money to other non-prized subscribers each month. In order to safe guard the interest of all non-prized subscribers each month the chit fund company insists upon the prized subscriber to provide guarantee for repayment of future instalments.
How soon can I expect payment once I bid the chit?
After a successful bidder is declared, they would have to provide satisfactory sureties/guarantors based on the future liability as specified in the byelaws. On receiving the surety, the liability of the member and guarantors are assessed. If the guarantors are acceptable a document is prepared which includes the guarantor bond and pro-note along with other requirements varying with the sureties given. Once this process is complete the payment is released to the bidder within 48 hours.
What action will be taken against defaulting subscribers?
In order to safe guard the interest of all the non-prized subscribers, penalty is collected from all subscribers who make delayed payment of periodic instalments. In case a non-prized subscriber defaults for a continuous period of three months, such subscriber will be removed. The actual amount paid by him in the chit minus company commission will be repaid to such defaulting subscriber, after completion of the chit period. In case a prized subscriber defaults for a continuous period of three months, a penalty of 2% per month will be collected and dividends will also not be paid to such defaulting prized subscriber. Legal action will be initiated against the said defaulting prized subscriber and his guarantors in court of law, for recovery of all dues.
Can I withdraw from a chit group after becoming a member?
When a member withdraws, the foreman has to find an alternate member in his place. Until then the chit fund company has to arrange funds on behalf of such a subscriber, for payment to a prized subscriber each month. Hence withdrawal is permitted, but the actual amount paid by the subscriber in the chit minus company commission will be repaid to such a withdrawing subscriber at the end of the chit period.
Subscriber must know that only non-prized chits can be cancelled. Prized chits can be pre-matured only on the condition that all pending and future instalments in the chit are paid in advance. The company will, as per the bye-laws and chit-agreement, make the payment after the deductions, on actual subscribed amount.
What is Chit Fund?
Chit is a mutually beneficial scheme where in a group of people contribute monthly towards the chit value and one member from the group is given the prize amount and the dividends are shared with all the other members. For Example if we consider a chit value of Rs.100000/- with 20 members for a duration of 20 months, then in the group each member has to contribute Rs.5000/- where by (20*5000) Rs.100000/- is collected. The auction is conducted in which the members participate and the person who discounts the maximum is declared as the prized subscriber. If there are more than one participant for maximum discount the Successful Bidder will be determined by way of lottery. 45% is the maximum bid allowed, which means a person foregoes Rs.45000/- and the balance Rs.55000/- is paid to the prized subscribers. Out of 45% discount, 5% goes to the company towards company’s commission for conducting the chit and balance is accumulated until an amount of Rs.100000/- post which a double auction will be conducted. The dividend accrued for the 20 months are the returns on investment for the monthly deposit made to their accounts.
What are the benefits of a chit fund?
Chit fund is a unique financial concept, which has flexibility to borrow or save. By paying one-month instalment amount, a person can get to borrow from the chit value, by offering a discount not exceeding the maximum limit ascertained in the chit agreement.(i.e.45% on face value of chit amount)
In a chit value of Rs.100000/- for a period of 20 months, first the subscriber can get an amount of 55000/-by paying only Rs.5000/- and remaining instalments he pays over a period of 20 months. The rate of borrowing is much cheaper than several other financial schemes.
The non-prized subscriber who is a saving member up to the last instalments gets dividend which is comparatively higher than the interest that are accrued by way of Recurring Deposit Schemes.
The purpose of drawing the prized amount need not be disclosed. It can be used for any need by the member for Example: House construction, Marriage, Education, Expansion of business, buy a Computer or any other purpose at his discretion.
There will be a compulsory saving which will earn dividends every month. Even if you take at the last month, the total dividends earned will be more than the bank interest rate.
What is the Income Tax benefits from saving or borrowing?
The dividends earned in a chit are not taxable. If you want to claim the bid as loss then these dividends has to be shown as revenue income in the assessment. Hence the entire dividend earned in a chit is not taxable if you don’t claim the bid amount as loss.
What happens if there are no bidders?
If there are no bidders, a draw is used to declare one of the members as “Successful Bidder” and the prize amount is handed to them. The bid amount will be based on the minimum value fixed
Is GST applicable on Chit Funds?
Yes, GST is applied on the commission we charge. Business establishments can claim GST input for the same.
What is the duration of these chits? How many members form the group?
The duration of our chit group ranges from 25 months- 40 months where we have 25 to 40 members respectively.
How do I start bidding? When do the auctions take place?
You can start bidding from the first auction only if all your subscription payments are up to date. You may participate in an auction in person, through an authorized representative or by communicating through a call and message.
The time, date and venue of auctions are fixed when the chit group begins. The duration of auction is 20 minutes. The bidder who bids the maximum is announced as the prized winner in that auction.
What are the sureties I can submit?
A member can give sureties depending on the future liability of the chit. Following are the sureties generally submitted by the members:
1. Personal Surety: Any salaried person working in State/Central Govt./Public Limited Companies/Banks and other Reputed Companies will be taken as surety.
2. FD Pledge: The member can provide any bank deposit; he can pledge the deposit certificate as surety. Member can also make the deposit from the prize money, which will be accepted as surety.
3. Bank Guarantee: Guarantee given by the Bank in a schedule format can be submitted as surety.
4. Income Tax Assessor: Any person with I T Assessment for the past three years be it business, profession etc will be taken as sureties.
5. Property Pledge: Title deeds of property in urban areas can be submitted as surety. Third party property is also accepted as surety.
How and when are the dividends distributed?
After the auction, the bid amount is distributed as dividends to subscribers. The dividends are adjusted against the subsequent month’s subscription amount. For e.g. if the monthly subscription amount for a Rs.10,00,000/- chit with 25 group members is Rs.40,000/- and dividend per member is Rs.10,000/- then the subscriber will only pay Rs.30,000/- as the subscription amount for the next installment
Is the foreman also a member of the group?
Yes. The foreman is also the member of the chit group and contributes instalment every month like all other members of the chit group.
Is GST applicable on Chit Funds?
Yes, GST is applied on the commission we charge. Business establishments can claim GST input for the same.
What is the security for my money?
A Registered Chit Fund Company makes a Security deposit equal to 100% of chit value in a Schedule Bank as FDR, which is pledged in favor of registrar of chits. Therefore, a member in a registered Chit Fund Company is very much secured than a member in a non-registered company.