Income tax Chit income

POSTED BY [email protected] ON May 21, 2013 3:49 pm COMMENTS (13)

Hi 

Any idea how the income from CHITs get calculated as income tax ?

13 replies on this article “Income tax Chit income”

  1. Dear PrithviRaj, yes is the answer.

    thanks

    Ashal

  2. PrithviRaj Karnati says:

    If i paid 400000 for span of 50 months and at the end if i get 470000 , this extra 70,000 do i need to show as extra income ?

    1. bemoneyaware says:

      Did you not bid during the 50 months and you were the last person to have the amount?

      1. PrithviRaj Karnati says:

        Yes…

        1. bemoneyaware says:

          PrithviRaj I checked up various sources but could not come to conclusion. Even checked up the act Union Government – Chit Funds Act 1982 (Except the State of Jammu and Kashmir) . Asking your CA would be helpful. The links I found are given below
          From ET we know
          On the other hand, any profit made by the last person in the chit is taxable. The amount is to be shown as income from other sources in the tax return and taxed at the marginal rate applicable to the individual. This further reduces the attractiveness of chit funds as a saving instrument.
          From KapilChitfunds
          20. What are the income tax benefits by saving and borrowing using chits?

          The chit loss can be deducted from the income from profession or business. The net surplus or dividends after completion of the chit period need to be offered as income, but some courts have ruled that this income is not subject to income tax.

          From Yahoo
          Your returns and dividends are both taxed (of course the amount deposited is subtracted from the one received). In effect, any profit from chit funds is taxed. This goes as part of “Other Income” in your returns.

          1. PrithviRaj Karnati says:

            Thanks a lot for your efforts…

          2. PrithviRaj Karnati says:

            https://margadarsi.com/FAQStatic.jsp#2 According to this famous chit fund in south india

            13. What are the Income Tax benefits from saving or borrowing?

            The dividends earned in a chit are not taxable. If you want to claim the bid as loss then these dividends has to be shown as revenue income in the assessment. Hence the entire dividend earned in a chit is not taxable if you don’t claim the bid amount as loss.

            Chit income is not taxable it seems.

        2. bemoneyaware says:

          Please let us know what you decided

          1. PrithviRaj Karnati says:

            Next year … I need to decide 🙂

  3. bemoneyaware says:

    From Economic Times :Are Chit funds for you
    A member who wins an auction by accepting a lower payment can set off the loss from the chit against business income. This reduces the cost of capital for the borrower. However, this benefit is available only to businessmen and traders.Salaried persons cannot set off the loss against their income.
    On the other hand, any profit made by the last person in the chit is taxable. The amount is to be shown as income from other sources in the tax return and taxed at the marginal rate applicable to the individual. This further reduces the attractiveness of chit funds as a saving instrument.

    1. PrithviRaj Karnati says:

      Thanks so much for the link.

  4. Dear Prithavi, the income from Chit funds ‘ll be treated as income from other sources & it ‘ll be added into your income form all other heads (salary, capital gains, house property, business income) & ‘ll be taxed at your slab rate.

    Thanks

    Ashal

    1. PrithviRaj Karnati says:

      Thanks Ashal

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