FAQs

FAQs

1.    Which fund investment is safe, mutual between funds vs chit funds?

Mutual funds are considered to be more safe than chit funds. This is because mutual funds are government-regulated, and comparatively, chit funds are not strictly regulated, which increases the risk of fraud and mismanagement. 

2.    Is TDS applicable on chit funds?

No, a TDS is not applicable on a chit fund. This is because a commission is not part of the expense of a chit subscriber. 

3.    Is a chit fund legal?

Yes, in India, a chit fund is legal. The Chit Fund Act 1982 is responsible for the regulation of chit-fund companies making them safe and legal. 

4.    How is the money gained from chit funds taxed?

The revenue received determines the taxation of money earned via chit funds. Because it is a return of the individual's funds, the principal amount received at the end of the chit-fund program is not taxed. Any interest or dividend income produced from the chit fund, on the other hand, is taxed according to the individual's applicable income tax bracket. Furthermore, any commissions or fees collected by the chit fund company are taxed under the Goods and Services Tax (GST) Act.

5.    What are state-run chit funds?

 State-run chit funds are those that the state government runs. These chit funds are usually founded to offer savings and credit facilities to people who do not have access to official banking services. 

6.    Does a state government register chit funds?

The Chit Fund Act of 1982 authorizes the relevant State Government to register chit fund firms, with the Chit Registrar nominated by the government in accordance with Section 61 of the Act.

7.    Are chit funds eligible for GST?

Chit funds are subject to GST, and the GST Council resolved at its 47th meeting to boost the GST rate on chit fund commission from 12% to 18%. However, it is crucial to remember that no input tax claims can be made for commodities used in chit-fund services.

8.    Are the dividends from chit funds taxable?

In terms of income tax, the total amount of income is taxed. Dividend income received every month, however, is neither tax-deductible nor taxable. If a loss occurs, it may be claimed as a business loss.