First let’s understand what is a chit fund according to the Chit fund department Chit means a transaction ( whether called chit fund, chit, kuri or by any other name), by which the foreman enters into an agreement with a number of subscribers that everyone of them shall subscribe a certain sum for a certain period and each subscriber in his turn as determined by lot or by auction, shall be entitled to a prized amount.
In this subscribers agree to subscribe an amount for certain months for a total chit value each subscriber will get his chit amount in his turn as determined by draw of lot or by auction. The highest bidder i.e. who allows maximum percentage to subscribers is given the chit amount. The amount, foregone by the subscriber is distributed as dividend amongst all the subscribers in every draw, after deducting commission/remuneration to be paid to the foreman of the company.
Registration of chit agreements and commencement certificate from the office the Registrar is must. The share of a subscriber in a chit is also known as ticket.
Points to be kept in mind before investing in chit fund:
- Before pooling your money make sure that company is registered.Verify the certificate of registration from the companies registrar.
- You are investing your hard earned money so through research on a person who is administrating is important.
- Compare the commission of several chit funds that will help you in selecting one with a lesser commission, which can be profitable.
- Before starting your investment it is necessary that you have good financial planning to invest throughout in chit funds.
- It is important to investigate beforehand about the legal status of the company, it means checking that company has not done any frauds before or not involved in fraudulent practices
Chit funds, like any other investment, have limitations and negative impacts. Before opting for a chit fund, thorough due diligence and research is crucial point. If you are investing smartly then you will definitely gain the benefits of chit fund.
