<p class="text-align-justify" style="padding:0px;margin-right:0px;margin-bottom:1rem;margin-left:0px;text-align:justify;color:rgb(0,0,0);font-family:Roboto;font-size:14px;"><span style="padding:0px;margin-top:0px;margin-right:0px;margin-left:0px;font-weight:bolder;">"Chit" </span>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.</p><p class="text-align-justify" style="padding:0px;margin-right:0px;margin-bottom:1rem;margin-left:0px;text-align:justify;color:rgb(0,0,0);font-family:Roboto;font-size:14px;"><span style="padding:0px;margin-top:0px;margin-right:0px;margin-left:0px;font-weight:bolder;">Example:</span> 25 subscribers agree to subscribe an amount of Rs.4,000/- for 25 months i.e. for a total chit value of Rs.1,00,000/-, each subscriber will get his chit amount in his turn as determined by draw of lot or by auction. During auction all non-prized subscribers bid by allowing percentage of subscription to be forgone. 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 5% commission/remuneration to be paid to the foreman of the company. Maximum bid is normally between 20% to 40% and the duration of chit is normally between 12 months to 50 months. In case there are more than one highest bidder in an auction, then draw of lots is made and chit amount given to the successful subscriber.</p><p class="text-align-justify" style="padding:0px;margin-right:0px;margin-bottom:1rem;margin-left:0px;text-align:justify;color:rgb(0,0,0);font-family:Roboto;font-size:14px;">These 25 subscribers constitute a Chit Group” and the chit fund company can run many such groups. For each chit group, previous sanction, registration of chit agreements and commencement certificate from the office the Registrar, Chit Funds, is a must. The share of a subscriber in a chit is also known as ticket.</p><p></p>

<p class="MsoNormal" style="line-height:16.5pt;"><span style="font-size:12pt;font-family:'Times New Roman', serif;color:#171313;">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. </span></p><p></p>

<p class="MsoNormal" style="line-height:16.5pt;"><span style="font-size:12pt;font-family:'Times New Roman', serif;color:#171313;">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. </span></p><p></p>

A<span style="color:rgb(23,19,19);font-family:'Times New Roman', serif;font-size:12pt;">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.</span><p class="MsoNormal" style="line-height:16.5pt;"><span style="font-size:12pt;font-family:'Times New Roman', serif;color:#171313;"></span></p><p></p>

<p class="MsoNormal" style="line-height:16.5pt;"><b><span style="font-size:12pt;font-family:'Times New Roman', serif;color:#171313;border:none 1pt;padding:0in;">.    What are state-run chit funds?</span></b><span style="font-size:12pt;font-family:'Times New Roman', serif;color:#171313;"></span></p><p></p> <p class="MsoNormal" style="line-height:16.5pt;"><span style="font-size:12pt;font-family:'Times New Roman', serif;color:#171313;"> 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. </span></p><p></p> <p class="MsoNormal" style="line-height:16.5pt;"><b><span style="font-size:12pt;font-family:'Times New Roman', serif;color:#171313;border:none 1pt;padding:0in;">6.    Does a state government register chit funds?</span></b><span style="font-size:12pt;font-family:'Times New Roman', serif;color:#171313;"></span></p><p></p> <p class="MsoNormal" style="line-height:16.5pt;"><span style="font-size:12pt;font-family:'Times New Roman', serif;color:#171313;">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.</span></p><p></p> <p class="MsoNormal" style="line-height:16.5pt;"><b><span style="font-size:12pt;font-family:'Times New Roman', serif;color:#171313;border:none 1pt;padding:0in;">7.    Are chit funds eligible for GST?</span></b><span style="font-size:12pt;font-family:'Times New Roman', serif;color:#171313;"></span></p><p></p> <p class="MsoNormal" style="line-height:16.5pt;"><span style="font-size:12pt;font-family:'Times New Roman', serif;color:#171313;">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.</span></p><p></p> <p class="MsoNormal" style="line-height:16.5pt;"><b><span style="font-size:12pt;font-family:'Times New Roman', serif;color:#171313;border:none 1pt;padding:0in;">8.    Are the dividends from chit funds taxable?</span></b><span style="font-size:12pt;font-family:'Times New Roman', serif;color:#171313;"></span></p><p></p> <p class="MsoNormal" style="line-height:16.5pt;"><span style="font-size:12pt;font-family:'Times New Roman', serif;color:#171313;">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.</span></p><p></p>