Difference between Mutual Funds vs Chit Funds

12 Nov

Basis

Chit Fund

Mutual Fund

Purpose

The purpose of a chit fund is two-fold - borrowing and saving.

The purpose of a mutual fund is to assist in investment as well as savings.

Government regulations

As per Section 61 of the Chit Funds Act 1982, the state government appoints the registrar of chits for the respective state.

The mutual funds in India are regulated by the Securities Exchange Board of India (SEBI)

Taxation rules

As per the Income Tax Act, the chit funds are taxed as ‘income from other sources.’

The taxation rule for a mutual fund depends upon the type of fund you have invested in.

Return possibilities

The rate of return varies from one chit to another.

The rate of return of a mutual fund is dependent on the strategies of investors and market performance.

Market volatility and risks

Chit funds are safe from and not exposed to the risks prevailing in the market.

Mutual funds are highly affected by market risks and volatility.

Blog Details