1. This Act may be called the Chit Funds Act, 1982.
2. It extends to the whole of India except the State of Jammu and Kashmir.
3. It shall come into force on such date as the Central Government may by notification in the official Gazette, appoint, and different dates may be appointed for different states.

a) “Approved Bank means the State Bank of India constituted under Sec 3 of State Bank of India Act – 1955 or a Subsidiary Bank constituted under Sec 3 of the SBI (Subsidiary) Act 1959, or a corresponding New Bank constituted under Sec 3 of Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 or a Regional Rural Bank established under Sec 5 of Regional Rural Bank Act 1976 or a corresponding New Bank constituted under Sec 3 of Banking Companies (Acquisition and Transfer of Undertakings) Act 1980 or Banking Company defined under clause (C) of Sec 5 of Banking Regulation Act 1949, or a Banking Institution notified by the Central Government under sec 51 of the Act or such other Banking Institution as the State Government may, in consultation with the Reserve Bank, approve for the purposes of this Act.
b) Chit means a transaction whether called chit, chit fund, chitty, kuri or by any other name by or under which a person enters into an agreement with a specified number of persons that every one of them shall subscribe a certain amount of money (or a certain quantity of grain instead) by way of periodical installments over a definite period and that each such subscriber shall, in his turn, as determined by lot or by auction or by tender or in such other manner as may be defined in the chit agreement, be entitled to the prize amount.
c) “Chit Agreement� means the document containing the articles of agreement between the foreman and the subscribers relating to the chit.
d) “Chit Amount� means the sum total of the subscription payable by all the subscribers for any installments of a chit without any deduction of discount or otherwise.
e) “Chit Business� means the Business of conducting a chit.
f) “Defaulting Subscriber� means a subscriber who has defaulted in the payment of subscription due in accordance with the terms of the chit agreement.
g) “Discount� means the sum of money (or the Quantity of grain) which a prized subscriber is, under the terms of the chit agreement required to forego and which is set apart under the said agreement to meet the expenses of running the chit or for distribution among the subscribers or both.
h) “Dividend� means the share of the subscriber in the amount of discount available under the chit agreement for rateable distribution among the subscribers at each installment of the chit.
i) “Draw� means the manner specified in the chit agreement for the purpose of ascertaining the prized subscriber at any installment of the chit.
j) “Foreman� means the person who under this chit agreement is responsible for the conduct of the chit and includes any person discharging the functions of the foreman. k) “Prize Amount� means the difference between the chit amount and the discount and in case of a fraction of a ticket means the difference between the chit amount and the discount proportionate to the fraction of the ticket.
l) “Registrar� means the Registrar of Chits appointed under Sec 61 and includes an Additional, a Joint, Deputy or an Assistant Registrar appointed under this section.
m) “Subscriber� includes a person who holds a fraction of a ticket and also a transferee of a ticket or fraction thereof by assignment in writing or by operation of law.
n) “Ticket� means the share of a subscriber in a chit. All to override other laws, memorandum, articles etc.

4 (1) : No chit shall be commenced or conducted without obtaining the previous sanction of the State Government within whose jurisdiction the chit is to be commenced or conducted or of such officer as may be empowered by that Government in this behalf, and unless the chit is registered in that state.

No person shall issue or cause to be issued any notice, circular, prospectus, proposal or other document inviting the public to subscribe for tickets in any chit unless such notice, circular, prospectus, proposal or document contains a statement that the previous sanction required under sec 4 has been obtained and the particulars of such sanction.

1) Every Chit agreement shall be in triplicate, and shall be signed by each of the subscriber or by any person authorized
by him in writing and the foreman and attested by atleast two witnesses, and it shall contain the following particulars.
a) Full name and address of every subscriber.
b) The number of tickets including the fraction of a ticket held by each subscriber.
c) The number of installments, amount payable at every installment, interest, penalty.
d) Probable date of commencement and duration of the chit.
e) Manner of ascertaining the prized subscriber.
f) The maximum amount of discount which the prized subscriber has to forego (The discounted amount cannot exceed 30%) Sec 6(3).
g) The mode and proportion in which the discount amount would be distributed by way of dividend.
h) The name of the approved bank in which chit money shall be deposited by the foreman.
i) The consequences to which a non prized subscriber or prized subscriber of the foreman shall be liable in case of
violation of any of the provisions of the chit agreement.
j) The nature and particulars of the security to be offered by the foreman.
6(2) : The duration of a chit shall not extend beyond a period of 5 years from the date of commencement.
Provided the State Government may permit the duration of a chit up to a period of 10 years as per satisfaction of the necessary provision.

1) Every chit agreement shall be filed in triplicate by the foreman to the Registrar (JRC).
2) The registrar shall retain one copy and return the duplicates to the foreman with an endorsement that the chit agreement is registered.
The registrar may refuse if
a) The security is insufficient.
b) The foreman has been convicted of any offence of this Act or any other Act regulating Chit Business.
c) Foreman has defaulted in payment of fees or filing of sanction.
d) That the foreman has been convicted of any offence involving moral turpitude and sentence to imprisonment for any such offence.

1) A company shall not commence or carry on chit business unless it has a paid up capital of not less than 1 lakh rupees (not withstanding the provisions of Sec 1 of Companies Act 1956).
2) Every company with its paid up capital being less than 1 lakh has to increase its paid up capital upto 1 lakh with in 3 years from the such commencement.
3) Every company carrying on chit business shall create and maintain a Reserve Fund and transfer 10% of the profit as per the profit and loss account before any dividend.

1) After all the tickets are fully subscribed the foreman files a declaration with the registrar.
2) Registrar after satisfying himself with the formalities shall issue “Certificate of Commencement� to the foreman.

1) The foreman shall furnish the Certificate of Commencement as per sec 9(2) to all the subscribers before 1st draw.
2) The foreman has to file to the registrar that the provision of Sec 10(1) have been complied.

1) The person carrying on such business shall include any of above terms.