FAQ

Benefits of a Chit Fund:
1. Savings: Chit funds promote disciplined savings by requiring regular, fixed contributions, helping individuals build a corpus over time and cultivate a saving habit.
2. Investment and Borrowing Tool: Participants invest money through monthly installments and can borrow against future installments by winning the auction, combining investment and borrowing benefits.
3. Access to Funds: Participants can access a lump sum of money through auctions or lotteries, useful for emergencies, education, starting a business, or making investments.
4. No Interest Payments: Chit funds typically have lower interest rates compared to traditional loans or credit options, making them a cost-effective borrowing choice.
5. Flexibility: Participants can choose the amount of contribution and the duration of the scheme, tailoring the chit value and duration to their financial goals and requirements.
6. Risk Distribution: The collective nature of chit funds distributes risk among participants, ensuring fairness and equal opportunity for all members to receive the chit value.
7. Potential for Returns: Chit funds can provide returns beyond contributions, especially if participants win the bid early in the scheme. The compulsory savings earn monthly dividends, often exceeding bank interest rates.
8. Tax-Free Dividends: While overall income is subject to income tax, the monthly dividends earned from chit funds are not taxable or tax deductible. Any losses can be claimed as business losses.
9. Trust and Transparency: Regulated and authorized chit fund companies, like Margadarsi, ensure trust and transparency in operations, providing participants with professional and expert management.
10. Social Connection: Chit funds foster a sense of community and social bonding among participants, as members interact and engage during meetings and auction processes, creating camaraderie and support.
11. Level Playing Field: Chit funds provide access to money for financially excluded communities, helping to level the playing field and promote financial inclusion.

A chit fund is a mutually beneficial scheme where a group of people contribute towards the chit value.
- Each month, a member from the group is selected as the prized subscriber, receiving the prize amount.
- Dividends are distributed among the remaining members.
- The maximum bid allowed is 40% of the chit value.
- The company receives a 5% commission, and the rest of the discount amount is distributed equally among the members.
- Dividends earned represent the interest on members' installment payments.
- Non-prized subscribers whose payments are up to date can participate in the auctions.
- Successful bidders must provide required sureties based on future chit liability.
- Monthly installments must be paid by the prized subscriber until the termination of the chit.
- If there are no bidders, the auction is decided by lot among non-prized subscribers.
- The dividend accrued over 50 months is the return on investment for monthly subscriptions made by members.

Members can make payments using cash, Demand Draft, or checks. Third-party checks are not acceptable. Issued checks must be cleared before the auction date for a member to be eligible to participate in the auction.
Online Payment Facility: Pay online directly from your bank account through Net Banking on our website. For details, visit our website "www.margadarsi.com".
ECS Facility: An authorization mandate allows us to debit your bank account every month for chit installments. For details, please contact any of our branches.

A member can participate in the auction from the very first auction, provided their payments are up to date. If payment is made by cheque, it must be cleared before the auction date. A defaulter, whose payments are not up to date before the auction, is not eligible to participate.

In every chit group, some members will need funds. Consequently, those requiring funds will participate in the bidding auction. The aim of the bidding process is to identify the successful bidder who offers the highest bid amount (not surpassing the maximum limit) within a specified auction duration of 5 minutes.

In chits, dividends earned are tax-free. However, if you declare the bid amount as a loss, these dividends must be reported as revenue income during assessment. Therefore, the entire dividend earned in a chit remains tax-exempt if you do not claim the bid amount as a loss.

A member can offer sureties based on the future liability of the chit. The following types of sureties are commonly provided by members:
Personal Surety: Any salaried individual employed in State/Central Government, Public Limited Companies, Banks, and other reputable companies can serve as a surety.
Bank Guarantee: A guarantee issued by a Scheduled Bank in a specified format can be submitted as surety.
Income Tax Assessor: Any individual with Income Tax assessment records for the previous three years, involving business or a profession, can act as a surety.
Property Pledge: Depositing title deeds of urban property can be used as surety. Third-party property can also be pledged as surety.

Once a member successfully bids on a chit, they must provide satisfactory sureties or guarantors according to the bylaws governing future liabilities. The surety form is then forwarded by the branch to the Corporate Office for a guarantor search and verification of liabilities for both the member and guarantors. Upon acceptance, the form is returned to the branch for documentation, including the guarantor bond, promissory note, and other necessary requirements based on the type of sureties provided.
After completing documentation and verification, the branch forwards the documents to the Corporate Office. Upon meticulous review and approval of the documents, payment is typically released within 2 days. While most transactions are completed within 10 days, the timeline largely depends on the type of sureties and prompt submission of required documents by the member. Regular payment and timely document submission by members facilitate expedited payment processing.

The share of discount represents the portion of the discount amount that a subscriber relinquishes during a draw to receive the prize amount. After deducting the foreman's commission from the discount amount, the remaining balance is distributed proportionally among all subscribers at each installment of the chit.

Bidding involves offering a discount, which is the amount that a subscriber agrees to forego during a draw in exchange for receiving the prize amount. Subscribers bid the highest discount permissible within the time limit set by the Chit Funds Act, 1982, typically up to a maximum of 40%.

If no bidder comes forward in an auction, a lot will be drawn among the non-prized subscribers at the end of the specified time (typically 5 minutes). The subscriber selected in the draw will then be declared as the prized subscriber and will receive the gross chit amount for their ticket, minus the foreman's commission.

A prized subscriber is defined as a subscriber who has received or is eligible to receive the net chit amount. Upon drawing the net chit amount, the prized subscriber is required to pay the foreman the amount due for their ticket at each installment by the specified auction date. Furthermore, the prized subscriber entitled to receive the net chit amount must provide adequate security or sureties to the satisfaction of the foreman to ensure timely payment of future subscriptions.

In a Chit Fund Organization, auctions are pivotal for determining the prized subscriber in each installment. The subscriber eligible to receive the prize amount is identified through a lot or auction conducted at the specified place and time as per the chit agreement. The auction proceedings last for 5 minutes from the start under the supervision of the foreman, whose decisions are final in case of disputes. To participate in an auction, subscribers must ensure their payments are up-to-date. They can submit written bid offers stating the maximum discount they are willing to forfeit, which must reach the foreman at least one day before the auction and can be withdrawn up to 24 hours prior to the auction time. Only subscribers or their authorized proxies may participate, with such authorizations required in writing. Auctions commence with a foreman’s commission of 5% of the chit value. Bidders can offer discounts up to the maximum specified (25/30/35/40% of the chit value as per the agreement), with bids incrementing by increments of rupees one hundred or higher multiples. The non-prized subscriber bidding the highest discount, not exceeding the specified maximum, is declared the prized subscriber. In cases where multiple bidders offer the maximum discount, the decision is determined by lot among them.