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CHIT SAVINGS SCHEMES

SHORT TERM SCHEMES

YUVASENE CLASS

BASIC - 20 MONTHS

REGULAR - 25 MONTHS

MID TERM SCHEMES

SALARY CLASS

SILVER - 30 MONTHS

GOLD - 40 MONTHS

LONG TERM SCHEMES

BUSINESS CLASS

DIAMOND - 50 MONTHS

PLATINUM - 100 MONTHS

Documents Required For Chits

Easy documentation for quick processing.

Checklist of Documents.

You need to submit the following documents to Yuvanadu Chits Company for the Application Form for Enrolment & Register of Chits and participate in a Yuvanadu Chits Group.

Subscribing to a Chit Scheme

During enrolment, you need to submit self-attested copies of the following documents.
- ID Proof (Copy of Aadhaar Card/Voter ID/PAN Card/Passport).
- Address Proof (Copy of Aadhaar Card/Voter ID/Passport/Gas Bill/Electricity Bill/Mobile Bill).

Prize Money Disbursement

At the time of Prize Money enrolment processing, the subscriber must submit self-attested copies of the following documents along with the required application forms.

KYC Documents

Mandatory with all classes of Security from both Subscriber/s & Guarantors
Identity/Age Proof	Copy of Aadhaar Card / Voter ID / PAN Card / Passport (Self attested)
Address Proof	Copy of Aadhaar Card / Voter ID / Passport / Gas Bill / Electricity Bill / Mobile Bill (Self Attested)
Permanent Address Proof	Copy of Aadhaar Card / Voter ID / Passport / Gas Bill / Electricity Bill / House Tax receipt (Self-attested)
*# Copy of House / Property	Latest tax paid receipt

Income Documents

For Employees	For Businesspersons / Professionals / Others
Copy of Employee ID Card	Copy of GST Certificate / Licenses / Govt approvals
Computerized Payslip / Salary Certificate (self-attested) / with disbursing officer attestation for latest three months	Copy of Proof of business established for ten years
Copy of Bank Account statement for latest one year (self-attested) – salary account	Copy of Bank Account statement for latest one year (Self-attested) – business account
Copy of Form No. 16 issued by Employer (for latest three years)	Copy of Audited Balance Sheet / Profit & Loss Account / adjusted statement of income certified by an auditor, GST Returns for latest three years
	Copy of Income Tax Return for latest three years with Acknowledgment/income computation (Self-attested)

How Does a Chit Fund Work?

A chit fund is a type of savings and credit scheme where a group of people contribute a fixed amount of money regularly for a specific period. The collected money is then distributed among the members in a systematic way.

The Basic Process:

1. Formation: A group of people (members) agree to contribute a fixed amount every month for a specified period. This amount is called the subscription.

2. Chit Fund Company: Usually, a chit fund company manages the process, collecting subscriptions, conducting auctions, and maintaining records.

3. Auction: Each month, a bidding process takes place. Members bid for the accumulated fund.

4. Winner: The member with the lowest bid wins the auction and receives the entire accumulated amount minus a commission for the chit fund company.

5. Foreman's Commission: The Chit Fund Company (or foreman) receives a predetermined commission from the winning bidder.

6. Dividends: The remaining amount is distributed among the other members as dividends.

7. Rotation: This process repeats every month until all members have won the auction once.

Key Points:

Savings and Credit: Chit funds offer both savings and credit opportunities. Members save through regular contributions and can access funds through the auction.
Reverse Auction: The auction works in reverse, with the lowest bidder winning.
Commission: The chit fund company charges a commission for managing the fund.
Regulation: Chit funds are regulated by the Chit Funds Act, 1982, to protect investors' interests.

Example:

Let's say chit fund scheme with 50 members that will run for 50 months, with each paying a monthly subscription of ₹10,000/- to create a ₹5,00,000/- pot. When the auction is announced, the member who bids the highest discount wins the Bid. (30% is the maximum discount anyone can bid as per Law).

Number of member's in the chit fund scheme	50 Members
Duration	50 months
Monthly subscription payable by each member	Rs. 10,000/-
Total Chit value	Rs. 5,00,000/- (50 member's x 10,000)

In this example, let us assume the winning bid offered a 30% discount.

Discount offered by the winning bid	30%
Amount of discount	Rs.1,50,000/- (30% of 5,00,000)
Amount received by the winner	Rs.3,50,000/- (5,00,000 less 1,50,000)

The balance amount is distributed equally among the member's after deducting the Foreman’s commission.

Foreman’s commission	5% = Rs.25,000/-
Total Dividend	Rs.1,50,000/- less Rs.25,000 = Rs.1,25,000/-
Dividend credited to each member’s account	Rs.1,25,000/50 = Rs.2,500/-

So in the following month, the member will have to pay only ₹7,500 (₹10,000 - ₹2,500) instead of ₹10,000.

Next month: The process repeats with a new auction and winner.

Chit Saving Scheme table explained with the help of the below example of a statement for the entire period:

Instalment - Monthly Subscription: ₹10,000
Period - Number of Months: 50
Gross Chit Amount: Total of Instalments by all member's - ₹5 lac (₹10,000x50)
Bid Offer Amount: Amount willing to be foregone by the subscriber to win the prize Money - ₹1,50,000
Bid Percentage: (if we consider Bid - 30%).
Min Bid Amount: 5% (Foreman Commission),
Max Bid Amount: 30% (for 20 to 40 months Chit Schemes) and 35% (for 50 to 100 months Chit Schemes),
Net Amount (Prize Money): Chit Amount minus Bid-Offer Amount (₹5,00,000 - ₹1,50,000 = ₹3,50,000)
Foreman Commission (FC): 5% of the Gross Chit Amount (₹25,000)
Total Dividend: Bid offer Amount minus Foreman Commission (₹1,50,000 - ₹25,000 = ₹1,25,000).
Dividend per Customer (Share of Discount): Total Dividend/No of Subscribers (₹1,25,000/50 = ₹2,500)
Next Month Instalment: Gross Instalment minus Dividend (₹10,000-₹2,500 = ₹7,500)

If someone win the Prize Money at the starting of the period

3,50,000		Total Amount Received - ₹3,50,000 (₹5 Lakhs)
7,500		(18% of FC as GST & Document Charges)
3,42,500		Net Amount Payable to Prized Member
4,12,500		Invested Amount by Member
-70,000		Loss
Invested 4,12,500	Dividend 87,500	Loss -70,000	Total 4,30,000	Invested 4,12,500	Net Profit 17,500

If someone wants to win the Prize Money at the end of the period

4,75,000		Total Amount Received - ₹4,75,000 (₹5 Lakhs)
7,500		(18% of FC as GST & Document Charges)
4,67,500		Net Amount Payable to Prized Member
4,12,500		Invested Amount by Member
55,000		Profit
Invested 4,12,500	Dividend 87,500	Profit 55,000	Total 5,55,000	Invested 4,12,500	Net Profit 1,42,500

Note: The above calculation is only an illustration. The actual return is determined by the auction discount decided by the Chit Fund subscribers.

Activities after Receiving Prior Sanction from The Registrar of Chits:

Following receipt of the Prior Sanction, the Foreman can announce the launch of the Chit Fund and begin selling tickets.
After selling all of the tickets, the Foreman will register the agreement with the Registrar of Chits and obtain the Commencement Certificate to hold the first auction.
The contribution will be made in the form of a fixed monthly instalment (₹10,000 per month in the above example).
From the second month onwards, the member's will be able to bid for the Prize Money from the collected funds through a reverse auction. The Highest Bidder/Prized Subscriber wins the Prize Money for that month.
30% is the maximum discount anyone can quote (as per Law).
As per the above example, the auction is confirmed at a 30% discount. (Discount amount is ₹1,50,000/-)
So, out of ₹5,00,000/- pooled, ₹3.50,000/- goes to the highest bidder (Prized Subscriber), 5% of ₹5,00,000/- (₹25,000) goes to the Foreman (Yuvanadu Chits), and the balance ₹1,25,000/- will be equally distributed to all the 50 member's.
Each member will get ₹2,500 (₹1,25,000/50) as their income, which is called Dividend (share of Dividend), and the same will be credited to their Chit account.
So next month, the subscriber needs to pay only ₹7,500 (₹10,000 - ₹2,500) instead of ₹10,000.

Participating in the Auction:

A member can participate in the auction for the Prize Money from the second month onwards. The first month's Gross Chit Amount goes to the company. To be eligible to make a bid, the subscriber should have paid all the instalments and not have any pending ones.

Options to Participate in the Auction:

A subscriber can participate in the auction in the following ways:

1. Direct Participation:
The member can either participate online or personally attend the auction in the Chit office on the date and time specified in the Chit Fund agreement.

2. Bid Offer Letter:
The subscriber needs to fill in all the details in the letter before signing and sending it to the Chit's office.

3. Bid Authorization Letter:
The customer can send a proxy to participate in the auction on their behalf. The proxy must carry the authorization letter & valid ID proof to participate in the auction.