## Chit Fund Return Breakdown

This **Chit fund returns calculator** has been developed to calculate the chit-fund estimated return of the whole investment. chit fund is a money-saving scheme popular in India it is also famous in foreign countries, Which works on the same process. Where a group of participating people contribute a fixed amount periodically every month, or regularly as per need. that proves a manually fixed amount of return on their investment, this chit-fund returns calculator helps to calculate all estimated returns received by a member.

## What is the Chit Fund?

Chit funds are money-saving and borrowing schemes that allow a member of the chit fund group when they need some money then they can borrow from this chit fund on some interest. This chit-fund scheme is managed by a member of the group. Chit Fund is a group of 20-40 members where each member contributes a fixed amount periodically and one member of the group receives the total amount collected (the “chit”) each time, typically through a bidding process.

### How does it work?

**Formation of the Group:**

- A group of individuals, known as “subscribers,” join together to form a chit fund.
- The group size can vary, but it usually consists of 20 to 40 members.

**Monthly Contribution:**

- Each member contributes a fixed amount of money to the fund every month.
- The total amount collected in a month is called the “chit amount.”

**Auction/Bidding Process:**

- Every month, an auction or bidding is held to determine which member can take the collected funds.
- Members bid for the chit amount, and the person willing to take the least amount (after a discount) wins the bid.
- The discount is distributed among the rest of the members as a dividend.

**Receiving the Fund:**

- The winning bidder receives that month’s chit amount (minus the discount).
- The rest of the members continue contributing until everyone has received the chit amount at least once.

**Interest/Dividend:**

- The discount, or the difference between the full chit amount and the bid amount, is distributed among the remaining members as interest or dividend.

**Repetition:**

- This process continues every month until all members have received the chit fund once.

### Types of Chit Funds:

**Registered Chit Funds:**

- These are regulated by the Chit Funds Act, of 1982, in India and are considered more secure.

**Unregistered Chit Funds:**

- These operate informally and are not regulated, which can make them riskier.

### Advantages:

**Access to Funds:**Members can access a lump sum amount during an emergency or when needed.**Savings Mechanism:**It encourages disciplined saving among members.**Potential Returns:**Members can earn dividends based on the bidding process.

### Risks:

**Default Risk:**If members default on their contributions, it can affect the entire fund.**Fraud Risk:**There is a higher risk of fraud or mismanagement in unregistered chit funds.**Regulatory Risk:**Not all chit funds are regulated, making some riskier.

### Use Cases:

- Chit funds are often used for personal needs like weddings, education, or business investments.
- They are also popular in communities with limited access to formal banking and credit.

### How to Calculate Chit Fund Returns

This chit-fund calculator tool will help to visualize the expected value of your potential return in this chit-fund and its benefits. So let’s know how to calculate step by step below.

- First of all, gather all data of your contribution to the chit fund and bidding.
- Fill this, in Monthly Contribution (₹): Number of Months: Bid Amount/Discount (₹): Interest Rate/Dividend (%): and select Chit Fund of Types and then click on the calculate button.
- Now you have on your front all the return lists, that will you receive.

**Try Also: Mutual Fund Calculator with Inflation rate**

### Key Inputs and Formulas Used in the Calculator

**Monthly Contribution (**:`contribution`

)

- This is the fixed amount each member contributes every month.

**Total Months (**:`months`

)

- The total duration of the chit fund in months.

**Bid Amount (**:`bidAmount`

)

- The amount at which the chit fund is bid. The difference between the total contribution and the bid amount is what the winning member takes home, minus any fees.

**Interest Rate (**:`interestRate`

)

- The interest rate applies to the bid amount. This simulates the return you would get if the chit fund were treated as an investment.

**Chit Type (**:`chitType`

)

- Different types of chit funds might have different returns due to varied conditions. The calculator adjusts the interest rate based on the chit type.

### How the Calculation Works

**1. Total Contribution**:

**Formula:**

Total Contribution=contribution×months

- This is the total amount a member has contributed to the chit fund over the entire period.

**2. Chit Received After Discount ( chitReceived)**:

- Formula:

Chit Received=Total Contribution−Bid Amount

- This is the amount you receive after winning the bid, accounting for the discount.

**3. Interest/Dividend Earned ( interest)**:

- Formula:

Interest=Chit Received×(Adjusted Interest Rate/100)

- Interest is calculated on the chit received using the adjusted interest rate.

**4. Total Return ( totalReturn)**:

- Formula:

Total Return=Chit Received+Interest

- The total return includes the chit received and the interest earned on it.

### Flow of the Calculator:

**Input Values**:

- The user inputs the monthly contribution, total months, bid amount, and interest rate. The chit type adjusts the interest rate based on predefined conditions.

**Calculations**:

- The calculator computes the total contribution, chit received after the bid, interest earned, and the total return.

**Output**:

- The results are displayed in both textual form and as a bar chart, giving a clear visual representation of how the contributions, chit received, interest, and total return compare.

### Example

Let’s assume the following values:

**Monthly Contribution**: ₹5000**Total Months**: 12**Bid Amount**: ₹40000**Interest Rate**: 8%**Chit Type**: Fixed

**Step-by-Step Calculation**:

**Total Contribution**:

- ₹5000 × 12 = ₹60000

**Chit Received After Discount**:

- ₹60000 – ₹40000 = ₹20000

**Interest**:

- ₹20000 × (8% / 100) = ₹1600

**Total Return**:

- ₹20000 + ₹1600 = ₹21600

So, the total return in this scenario would be ₹21,600.

#### Conclusion:

This chit-fund calculator tool is built to calculate your chit-fund investment potential of returns and it also helps to calculate the estimated returns that you got by chit-fund.