MYTHS VS FACTS ABOUT CHIT FUND
- MYTHS VS FACTS ABOUT CHIT FUND
Myths VS Facts About Chit Fund
Chit business is a local financial instrument. a prudent method of saving money to meet short- and medium-term objectives. With no interest on the loans taken out, the chit industry helps many small and large-scale business investments with their financial demands. In India, it is a popular type of microfinance service.
There are a lot of misconceptions about the chit business savings model, despite the fact that it serves a valuable function for many. The era of inherent risk in small-business transactions is long past. If you paid close attention to the falsehoods circulating about the chit business, the reality paints a different tale.
We have revealed to you the myths and the real meaning of the rumours.
Myth 1 As a financial tool, Chit Funds don’t really offer much.
Truth: The statement about chit funds as a financial tool is absurd.
When an investor takes out a loan or deposit money with a financial institution, they worry that the interest rates will consume a large portion of their investment. The antithesis of this is chit-business investments.
The main benefit of chit groups is that each investor receives a monthly payout in addition to the monthly instalment payment. Chit funds, in contrast to other investment structures, provide significant advantages.
For business people, it is vital to take care in having access to current financial demands while working on mid-term goals. Chit funds are used as a no-interest loan product. Chit funds, which depend exclusively on the performance of the group, are not vulnerable to market dangers like mutual funds or equities are.
Myth 2: Chit funds are unregulated and not recognised by the government.
Truth: The Chit Funds Act, of 1982, which is enforced by state legislation all over India, governs the safe and regulated chit fund business.
Different legal protections are in place to safeguard both financial institutions and end consumers.
Additionally, chit-fund laws are updated annually in the Finance Union Budget Speeches, and the legislation is creating protection for both chit-fund companies and investors.
Myth 3: Returns on chit funds are taxable
Truth: Many people are unaware of this important advantage, despite the fact that the truth behind this myth is an incredible one.
Returns on chit funds are not taxed because section 194a does not classify the dividends as interest. Isn’t it fantastic?
The prize money or dividend is tax-free and not subject to TDS deductions. If you invested in a chit for a business venture, you can also deduct your gain or loss from the chit fund.
However, tax deductions apply when the money produced from the chit is invested further for your company’s purposes or on any other assets.
Myth 4: Chit funds are a local, informal tool that is improperly managed
Truth: The use of cutting-edge technologies and the advancement of technology in the Fintech sector are encouraging the management of chit funds.
In Kerala’s rural areas, 1930s chits were first prevalent and widespread, just like in ancient times (Domestic households). However, as technology has developed, a revolution in the fintech sector is supporting the management of chit funds with cutting-edge solutions.
Conclusion
Any type of investment has benefits and drawbacks of its own. The drawbacks are occasionally made into a compelling narrative that is frequently untrue. Investment in chit funds is a reliable source of capital for the Indian economy and society. Northeast Chit Fund Pvt. Ltd. gives you all of the opportunities and is one the most trusted chit fund companies in Hyderabad which is registered under the UDYAM scheme of the Ministry of Micro, Small and Medium Enterprises. Also, being the members of Telangana Federation of Chit Funds, we prove our trustworthiness to our clients. Contact Us now to join us and get a consultancy call from us and we assure complete support from our team.