How does chit operate ?

Chit is a mutually beneficial scheme where in a group of people contributes towards the chit value and one member from the group is given the prize amount and the dividends are distributed to all the other members.

For Example if we consider a chit value of Rs.100000/- with 20 members in the group each member has to contribute Rs.5000/- where by (20 X 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..( Maximum bid allowed is 30% of chit value ) If there are more than one participant for maximum discount the Successful Bidder will be determined by way of lottery. Where in, the tokens bearing the numbers allotted to the members is put into a box and one token is drawn by any of the member present in the auction and thus, the member whose number is mention on the drawn token will be declared as the Successful Bidder.

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 installment 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.

In a chit value of Rs.250000/- for a period of 20 months, first the subscriber can get an amount of 70000/-by paying only Rs.5000/- and remaining installments 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 upto the last installments 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, or any other purpose at his discretion.

What are the various chit groups available in MRJ Chits Pvt Ltd?

MRJ Chits  are having a wide range of chit groups available which suits all walks of people for Example: Individual, Employee, Professionals, Agriculturists, Land Lords, Proprietors, Partnership firms, companies, corporate offices, Organization etc., It has a wide range of Chit values starting from Rs.1,00,000/- to a maximum range of Rs.25,00,000/-

What is the duration of these chits?

MRJ Chits is having various range of chit duration. They are 40, 25 and 20 months groups with 40,,25 and 20 members respectively forming each group.

How soon can I expect  the payment  once I bid the chit?

Once a member is declared successful bidder it is his responsibility to provide satisfactory sureties/guarantors based on the future liability as specified in the byelaws. On receipt of the surety form the Branch, it is forwarded to the Head Office for Guarantor search. The liability of the member and guarantors are verified and then if the guarantors are acceptable it is sent back to the Branch for Documentation. The Branch has to prepare the document that mainly includes the guarantor bond and pro-note apart from the other requirements depending on the kind of sureties submitted.

Once the documentation and verification is complete, the document is forwarded to HO, which scrutinizes the document in all aspects, and if the document is found to be satisfactory payment is released.

In most of the cases the entire transactions are completed within 30 days very much depending on the kind of sureties and the document produced by the member. Members who make regular payments and those who submit the required documents immediately will have the greatest opportunity to receive the fastest payment.

What are the mode of payment?

Member can make payments either by NEFT,cash, Demand Draft or cheques. Third party cheques are not acceptable. Issued cheques have to be realized before the auction date if the member wants to participate in auction

What are 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 is 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.

When can I participate in the auction?

A member can participate in auction right from the second auction itself, only if he or she has made the payments up to date. If paid by cheque, it should be realized before the auction date. A defaulter whose payment is not upto date before auction is not eligible to participate in the auction.

What is the purpose of bidding ?

In every chit group some members will be in need of money. So all 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 i.e. 5 minutes.

What is the benefit from saving in chit?

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.