Myth 1 Chit Funds offer none significant advantage as a financial tool

Truth: The statement about chit funds as a financial tool is absurd.

When an investor borrows a loan or places investment sources on any finance institutions, worries about the interest rates that will eat up major of the contribution. Chit business investments are the opposite of this.

The biggest advantage of chit groups is, besides every month installment payment, each investor gets a share of money every month as a dividend. Comparably, chit funds offer substantial benefits over any other investment models.

For business people, while planning on mid-term goals, it is crucial to be careful in having access to immediate financial needs. Chit funds serve as no interest loan product. Chit funds are not subject to market risks, unlike mutual funds or stocks as they are dependent only on the group’s performance.

Myth 2 Chit Funds are not Government regulated and unrecognized

Truth: The chit fund industry is a safe and regulated industry, governed by the Chit Funds Act, 1982, which is enforced by state laws across India.

There are various rights in place to protect both the end users and the financial institution.

Also, every year in the Finance Union Budget Speeches, chit fund acts are revised, and the law is making the security for both the chit fund companies and investors

Myth 3 Chit funds returns are taxable

Truth: The facts behind this myth are an awesome one and many are unaware of this significant advantage.

Chit funds returns are not subjected to tax because the dividends are not classified as interest under section 194a. Isn’t it awesome?

The prize money or the dividend is not subjected to TDS deductions and they are tax-free. You can also offset your gain or loss from the chit fund if your investment in a chit is for a business investment

But, when the earned money through the chit is invested further for your business needs or on any other assets, they are subjected to tax deductions.

Myth 4 Chit Funds are informal and local tool without proper management

Truth: The technology has advanced and revolution in the Fintech industries are promoting the chit fund management with sharp cutting edge tools.

At the beginning like ancient times, 1930s chits were popular and common in rural parts of Kerala (Domestic households). But now, the technology has advanced and revolution in the Fintech industries are promoting the chit fund management with sharp cutting edge tools.

Chit.Biz cloud-based ERP solution to the chit fund management helps to plan, manage and conduct auctions for “n” number of groups, larger chit value groups, and longer time duration chit groups.

The collection app agent can help you monitor the agent status on every chit group payment. The customer portal also helps the net banking facility of the monthly installment payment.

The simplicity and ease of accessibility make us stand out against the rest from the crowd. Our tool supports to market and manage under one platform.

Myth 5 Chit funds serve to only lower-income people from small towns and villages

Truth: Probably the biggest myth so far. If you visit any respectable chit fund, you’ll easily come to know that many people have built their wealth using chit funds as their primary financial tool.

For example, Lok Capital, a VC firm founded by IDFC’s Rajiv Lall and PE veteran and former Actis head in India, Donald Peck, was focusing on the microfinance sector, is now actively exploring options to invest in chit fund companies. “We are looking at investment opportunities that will expand financial inclusion, and chit funds is one. The chit fund model is unique, and it has a lot of advantages, with elements of savings. They operate on the same model as MFIs, and it also caps their commission,” said Venky Natarajan, managing director of Lok Advisory Services.

Chit funds are the most versatile financial tool available on the market. Because of the secure savings and flexible borrowing options, high net worth individuals like businessmen, IT professionals and even banking professionals often take part in chit funds. Apart from regular domestic household people like housewives, students, and young professionals, chit funds are used by all strata of society to accomplish their goals.

Conclusion

Any form of investment has its own advantages and disadvantages. The disadvantages are sometimes cooked up into a great story that happens to be false at most times. Chit fund investment is a good source of funds for Indian economy society. To manage your chit fund business, sign up for your free pre-launch product offer.