Chit Fund Value
We Are The aRight Place To Build Your Business
In this chit group, the total chit value is set at ₹10,00,000. This is known as the Chit Fund Value.
How Chit Funds Operate (₹10 Lakh Example with 25 Months)
Always be the light that guides others.
Chit Fund Duration
We Are The aRight Place To Build Your Business
For this example, the chit fund duration is 25 months, which is referred to as the Chit Term.
Participants
We Are The aRight Place To Build Your Business
The foreman or chit fund organizer needs to gather 25 participants who are interested in investing in this chit. These participants are known as Subscribers.
Foreman's Responsibilities (Sathyanithi Chits)
Once the chit group begins:
- The foreman is responsible for registering the chit group with the registrar of chits.
- The foreman must deposit 100% of the chit value (₹10,00,000) as security.
- This security deposit can only be withdrawn after the chit group concludes (CHIT TENURE + 2 MONTHS FOR EXAMPLE: 25 MONTHS + 2 MONTHS= 27 MONTHS) and all participants receive their payments.
- This regulation ensures the subscribers’ money is protected.
Monthly Contributions
Once the chit group starts:
- Each subscriber is required to contribute a portion of the chit value every month. The monthly subscription is calculated as Chit Value ÷ Number of Subscribers. In this case, ₹10,00,000 ÷ 25 = ₹40,000 per month.
- This is called the Monthly Subscription. The number of subscribers (25) and the chit term (25 months) are always equal.
- The maximum contribution a participant would make in any given month is ₹40,000, but subscribers may not always have to pay the full amount.
Chit Fund Bids and Discounts
Once the chit group starts:
Participants do not always pay the full ₹40,000 every month. This is due to the chit fund’s bidding and discount system.
Typically, the maximum discount or bid permitted is 30%. For this example, let’s assume a subscriber bids 30% of the chit value. 30% of ₹10,00,000 equals ₹3,00,000. This amount is called the Chit Discount, and the chit runs for 25 months.
Chit Discount Example
Once the chit group starts:
The foreman charges a commission of 5% of the chit value, which in this case is ₹50,000. This commission is deducted from the chit discount: ₹3,00,000 – ₹50,000 = ₹2,50,000. This remaining amount is equally distributed among all 25 subscribers.
In this scenario, ₹2,50,000 will be divided among the 25 subscribers, meaning each subscriber will receive a discount of ₹10,000.
Thus, in the following month, instead of paying ₹40,000, each subscriber will only have to pay ₹30,000 due to the ₹10,000 chit discount.
Conclusion
In this ₹10,00,000 chit fund with a 25-month term, participants benefit from the bidding and discount system. A 30% bid results in a ₹2,50,000 discount, lowering the monthly payment for each subscriber from ₹40,000 to ₹30,000. This flexibility allows subscribers to manage their contributions more easily.