Chit Fund Calculator
Calculate your chit fund returns, monthly contribution, dividend, and effective interest rate based on your auction month.
Monthly Contribution
₹25,000
Monthly Dividend
₹5,000
Chit Value at Auction
₹3,75,000
Cost-Benefit Analysis
Monthly Cash Flow
₹20,000/mo net
| Year | Contribution | Dividend |
|---|---|---|
| 1 | ₹25,000 | ₹5,000 |
| 2 | ₹25,000 | ₹5,000 |
| 3 | ₹25,000 | ₹5,000 |
| 4 | ₹25,000 | ₹5,000 |
| 5 | ₹25,000 | ₹5,000 |
| 6 | ₹25,000 | ₹5,000 |
| 7 | ₹25,000 | ₹5,000 |
| 8 | ₹25,000 | ₹5,000 |
| 9 | ₹25,000 | ₹5,000 |
| 10 | ₹25,000 | ₹5,000 |
| 11 | ₹25,000 | ₹5,000 |
| 12 | ₹25,000 | ₹5,000 |
| 13 | ₹25,000 | ₹5,000 |
| 14 | ₹25,000 | ₹5,000 |
| 15 | ₹25,000 | ₹5,000 |
| 16 | ₹25,000 | ₹5,000 |
| 17 | ₹25,000 | ₹5,000 |
| 18 | ₹25,000 | ₹5,000 |
| 19 | ₹25,000 | ₹5,000 |
| 20 | ₹25,000 | ₹5,000 |
| Month | Contribution | Dividend | Net Outflow | Cumulative |
|---|---|---|---|---|
| 1 | ₹25,000 | ₹5,000 | ₹20,000 | ₹20,000 |
| 2 | ₹25,000 | ₹5,000 | ₹20,000 | ₹40,000 |
| 3 | ₹25,000 | ₹5,000 | ₹20,000 | ₹60,000 |
| 4 | ₹25,000 | ₹5,000 | ₹20,000 | ₹80,000 |
| 5 | ₹25,000 | ₹5,000 | ₹20,000 | ₹1,00,000 |
| 6 | ₹25,000 | ₹5,000 | ₹20,000 | ₹1,20,000 |
| 7 | ₹25,000 | ₹5,000 | ₹20,000 | ₹1,40,000 |
| 8 | ₹25,000 | ₹5,000 | ₹20,000 | ₹1,60,000 |
| 9 | ₹25,000 | ₹5,000 | ₹20,000 | ₹1,80,000 |
| 10 | ₹25,000 | ₹5,000 | ₹20,000 | ₹2,00,000 |
| 11 | ₹25,000 | ₹5,000 | ₹20,000 | ₹2,20,000 |
| 12 | ₹25,000 | ₹5,000 | ₹20,000 | ₹2,40,000 |
| 13 | ₹25,000 | ₹5,000 | ₹20,000 | ₹2,60,000 |
| 14 | ₹25,000 | ₹5,000 | ₹20,000 | ₹2,80,000 |
| 15 | ₹25,000 | ₹5,000 | ₹20,000 | ₹3,00,000 |
| 16 | ₹25,000 | ₹5,000 | ₹20,000 | ₹3,20,000 |
| 17 | ₹25,000 | ₹5,000 | ₹20,000 | ₹3,40,000 |
| 18 | ₹25,000 | ₹5,000 | ₹20,000 | ₹3,60,000 |
| 19 | ₹25,000 | ₹5,000 | ₹20,000 | ₹3,80,000 |
| 20 | ₹25,000 | ₹5,000 | ₹20,000 | ₹4,00,000 |
What is a Chit Fund?
A chit fund is a traditional Indian savings and borrowing scheme popular in Kerala, Tamil Nadu, Andhra Pradesh, and Telangana. A group of N members each contributes a fixed amount every month for N months. Each month, one member wins the "pot" through an auction — the member who offers the highest discount wins. The discount (minus foreman commission) is distributed back to all members as a dividend, reducing their effective monthly contribution.
How Does a Chit Fund Work?
Here's a simple example with a ₹5,00,000 chit fund and 20 members:
- Monthly contribution: ₹25,000 per member (₹5,00,000 ÷ 20)
- Auction: Each month, one member bids a discount (say 25%) to win the pot
- Winner gets: ₹3,75,000 (chit value minus 25% discount)
- Dividend: The 25% discount (₹1,25,000) minus foreman commission (5% = ₹25,000) = ₹1,00,000 is split equally among all 20 members = ₹5,000/month dividend
- Net monthly cost: ₹25,000 – ₹5,000 = ₹20,000 per member
Early vs Late Auction — Borrowing vs Saving
The auction month determines whether a chit fund acts as borrowing or saving for you:
- Early auction (month 1-10): You get the money early but pay more in total contributions. This is effectively a loan — the net cost is your interest payment.
- Late auction (month 11-20): You contribute for many months before getting the pot. This is effectively a savings scheme — the dividends reduce your total cost below the chit value.
FAQ: Are chit funds legal in India?
Yes, chit funds are legal and regulated under the Chit Funds Act, 1982. Registered chit fund companies are regulated by state governments. However, unregistered chit funds are illegal. Always verify that the chit fund is registered with the state registrar and the foreman has a valid license. Popular registered chit fund companies include Shriram Chits, Margadarsi Chits, and KSFE (Kerala State Financial Enterprises).
FAQ: Is chit fund better than FD?
It depends on when you take the pot. If you take it late (last few months), you effectively earn returns similar to or better than an FD, since your dividends reduce your total cost below the chit value. However, chit funds carry higher risk — if other members default, the scheme may face issues. FDs are safer with guaranteed returns and DICGC insurance up to ₹5 lakh. Chit funds offer flexibility that FDs don't — you can access funds early in an emergency through the auction.
FAQ: What is foreman commission?
The foreman (organizer) of the chit fund charges a commission, typically 5% of the chit value, which is deducted from the auction discount before distributing dividends. This commission covers the operational costs of running the chit fund. Under the Chit Funds Act, the maximum foreman commission is capped at 5% of the chit value.