CHIT FUNDS ACT, 1982
CHAPTER I PRELIMINARY
1. Short title, extent and commencement 1
2. De nitions 2
3. Act to override other laws, memorandum, articles, etc. 6
CHAPTER II
REGISTRATION OF CHITS, COMMENCEMENT AND CONDUCT OF CHIT BUSINESS
4. Prohibition of chits not sanctioned or registered under the Act 7
5. Prohibition of invitation for subscriptions except under certain conditions 9
6. Form of chit agreement 9
7. Filing of chit agreement 10
8. Minimum capital requirements for the commencement, etc. of a chit, and creation of a reserve fund, by a company 11
9. Commencement of chit 12
10. Copies of chit agreement to be given to subscribers 12
11. Use of words “chit”, “chit fund”, “chitty”, “kuri”, “fraternity fund” or “Rotating Savings and Credit institution” 12
12. Prohibition of transacting business other than chit business by a company 13
13. Aggregate amount of chits 13
36. Recognition of transfer by foreman
37. Entry of transferee’s name in the books
CHAPTER VII MEETINGS OF GENERAL BODY OF SUBSCRIBERS
38. Meetings of general body of subscribers
CHAPTER VIII
OF CHITS
39. Provision for continuation of chits in certain cases
40. Termination of chits
41. Copy of assent or consent to be led with Registrar
42. Refund of non-prized subscribers’ subscriptions
43. Subscribers’ dues to be rst charge on chit assets
CHAPTER IX
44. Foreman to allow certain subscribers to inspect chit records
45. Preservation of chit records by foreman
46. Inspection of chit books and records by Registrar
47. Power of Reserve Bank to inspect chit books and records
etc.,
56. Noti cation of winding up order
57. Cessation of winding up proceedings on insolvency of foreman, etc., or the winding up of the company and transfer of such proceedings
58.
59.
61.
62.
63.
CHAPTER XII
DISPUTES
64.
65.
67.
68.
83.
Chit Funds Act, 1982
[40 OF 1982]1
An Act to provide for the regulation of chit funds and for matters connected therewith. BE it enacted by Parliament in the Thirty-third Year of the Republic of India as follows:
CHAPTER I PRELIMINARY
Short title, extent and commencement.
1. (1) This Act may be called the Chit Funds Act, 1982.
(2) It extends to the whole of India 2[***].
(3) It shall come into force on such date3 as the Central Government may, by notication in the Of cial Gazette, appoint, and different dates may be appointed for different States.
1. Dated 19-8-1982.
2. Words “except the State of Jammu and Kashmir” omitted by the Jammu and Kashmir Reorganisation Act, 2019, w.e.f. 31-10-2019.
3. This Act shall come into force in— Andhra Pradesh, vide Notification No. S.O. 2197(E), dated 15-9-2008, w.e.f. 15-9-2008; Arunachal Pradesh, vide Notification No. S.O. 950(E), dated 30-4-2012, w.e.f. 30-4-2012; Assam, vide Notification No. S.O. 166(E), dated 22-2-1990, w.r.e.f. 1-3-1990; Bihar, vide Notification No. S.O. 864(E), dated 28-9-1987, w.e.f. 2-10-1987; Gujarat, vide Notification No. S.O. 950(E), dated 30-42012, w.e.f. 30-4-2012; Haryana, vide Notification No. S.O. 950(E), dated 30-4-2012, w.e.f. 30-42012; Himachal Pradesh, vide Notification No. S.O. 808(E), dated 29-10-1984, w.e.f. 1-11-1984; Karnataka, vide Notification No. S.O. 946(E), dated 30-12-1983, w.e.f. 2-1-1984; Kerala, vide Notification No. S.O. 950(E), dated 30-4-2012, w.e.f. 30-4-2012; Madhya Pradesh, vide Notification No. S.O. 381(E), dated 27-6-1986, w.e.f. 1-7-1986; Maharashtra, vide Notification No. S.O. 646(E), dated 1-6-2004, w.e.f. 15-6-2004; Manipur, vide Notification No. S.O. 779(E), dated 28-10-1994, w.e.f. 1-11-1994; Meghalaya, vide Notification No. S.O. 1135(E), dated 30-12-1987, w.e.f. 2-1-1988; Mizoram, vide Notification No. S.O. 2197(E), dated 15-9-2008, w.e.f. 15-9-2008; Nagaland, vide Notification No. S.O. 950(E), dated 30-4-2012, w.e.f. 30-42012; Orissa, vide Notification No. S.O. 629(E), dated 26-8-1985, w.e.f. 1-9-1985; Punjab, vide Notification No. S.O. 204(E), dated 31-3-1999, w.e.f. 1-4-1999; Rajasthan, vide Notification No. S.O. 481(E), dated 26-7-1989, w.e.f. 1-7-1989; Sikkim, vide Notification No. S.O. 837(E), dated 14-11-1984, w.r.e.f. 6-11-1984; Tamil Nadu, vide Notification No. S.O. 281(E), dated 12-4-1984, (Contd. on page 2)
COMMENTS
CASE LAWS
Extension of Central Act – Legislative Competence and Judicial Non-Intervention
- The principal question in this case was whether the Kerala Chitties Act, 1975 stood repealed by virtue of the enactment of the Chit Funds Act, 1982, especially in the absence of a Central Government notification extending the Central Act to Kerala under section 1(3). The petitioners, chit fund operators from outside Kerala with subscribers in the State, challenged the constitutional validity of section 4(1)(a) of the Kerala Chitties Act (inserted by Finance Act 7 of 2002), which mandated opening a branch and obtaining registration under the Kerala Act if 20% or more subscribers resided in Kerala. They argued that this was discriminatory, extra-territorial, and repugnant to the Central Act, hence unconstitutional. The Kerala High Court held that section 1(3) empowers the Central Government to bring the Act into force in different states at different times and that no notification had been issued for Kerala. As such, the Kerala Chitties Act continued to operate. The Court ruled that it could not direct the Central Government to issue a notification under section 1(3), as this discretion lies solely with the executive. Therefore, the Kerala Act had not been repealed under section 90 of the Central Act due to the absence of such notification. The impugned provision in the Kerala Act was held ultra vires due to its discriminatory and extra-territorial nature but the Court firmly reinforced the procedural requirement and legislative discretion built into section 1(3) of the Chit Funds Act, 1982. – The Dharmodayam Co. v. The Union of India AIR 2005 KERALA 253.
De nitions.
2. In this Act, unless the context otherwise requires,—
(a) “approved bank” means the State Bank of India constituted under section 3 of the State Bank of India Act, 1955 (23 of 1955), or a subsidiary bank constituted under section 3 of the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959), or a corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970), or a Regional Rural Bank established under section 3 of the Regional Rural Banks Act, 1976 (21 of 1976), or a corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980), or a banking company as defined under clause (e) of section 5 of the Banking Regulation Act, 1949 (10 of 1949), or a banking institution
(Contd. from page 1)
w.e.f. 13-4-1984; Tripura, vide Notification No. S.O. 950(E), dated 30-4-2012, w.e.f. 30-4-2012; Uttarakhand, vide Notification No. S.O. 4212(E), dated 30-8-2018, w.e.f. 15-9-2018; Uttar Pradesh, vide Notification No. S.O. 133(E), dated 29-1-1988, w.e.f. 1-2-1988; West Bengal, vide Notification No. S.O. 143(E), dated 1-3-1984, w.e.f. 2-4-1984; Andaman and Nicobar Islands, vide Notification No. S.O. 493(E), dated 27-6-1985, w.e.f. 1-7-1985; Chandigarh, vide Notification No. S.O. 322(E), dated 27-4-1984, w.e.f. 1-5-1984; Dadra and Nagar Haveli, vide Notification No. S.O. 660(E), dated 30-8-1984, w.e.f. 3-9-1984; Goa, Daman & Diu, vide Notification No. S.O. 910(E), dated 24-12-1985, w.e.f. 1-1-1986; Lakshadweep Island, vide Notification No. S.O. 661(E), dated 30-8-1984, w.e.f. 3-9-1984; Pondicherry, vide Notification No. S.O. 771(E), dated 28-10-1986, w.e.f. 1-11-1986; National Capital Territory of Delhi, vide Notification No. S.O. 338(E), dated 9-3-2007, w.e.f. 1-4-2007.
(
(
notified by the Central Government under section 51 of that 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 4[,fraternity fund, Rotating Savings and Credit Institution] 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 sum of money (or a certain quantity of grain instead) by way of periodical instalments 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 specified in the chit agreement, be entitled to the 5[net chit amount].
Explanation.—A transaction is not a chit within the meaning of this clause, if in such transaction,–
(i) some alone, but not all, of the subscribers get the 5[net chit amount] without any liability to pay future subscriptions; or
(ii) all the subscribers get the 6[gross chit amount] by turns with a liability to pay future subscriptions;
c) “chit agreement” means the document containing the articles of agreement between the foreman and the subscribers relating to the chit;
(d) 7[***]
(
e) “chit business” means the business of conducting a chit;
(f) “defaulting subscriber” means a subscriber who has defaulted in the payment of subscriptions 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 for both;
(h) 8[*** ]
4. Inserted by the Chit Funds (Amendment) Act, 2019, w.e.f. 1-1-2020.
5. Substituted for “prize amount”, ibid.
6. Substituted for “chit amount”, ibid.
7. Omitted, ibid. Prior to its omission, clause (d) read as under : ‘(d) “chit amount” means the sum total of the subscriptions payable by all the subscribers for any instalment of a chit without any deduction of discount or otherwise;’
8. Omitted, ibid. Prior to its omission, clause (h) read as under :
‘(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 instalment of the chit;’
(i) “draw” means the manner specified in the chit agreement for the purpose of ascertaining the prized subscriber at any instalment of the chit;
(j) “foreman” means the person who under the chit agreement is responsible for the conduct of the chit and includes any person discharging the functions of the foreman under section 39;
9[(ja) “gross chit amount” means the sum-total of the subscriptions payable by all the subscribers for any instalment of a chit without any deduction of discount or otherwise;
(jb) “net chit amount” means the difference between the gross chit amount and the discount, and in the case of a fraction of a ticket means the difference between the gross chit amount and the discount proportionate to the fraction of the ticket, and when the net chit amount is payable otherwise than in cash, the value of the net chit amount shall be the value at the time when it becomes payable;]
(k) “non-prized subscriber” does not include a defaulting subscriber;
(l) “prescribed” means prescribed by rules made under this Act;
(m) 10[***]
(n) “prized subscriber” means a subscriber who has either received or is entitled to receive the 11[net chit amount];
(o) “Registrar” means the Registrar of Chits appointed under section 61, and includes an Additional, a Joint, Deputy or an Assistant Registrar appointed under that section;
(p) “Reserve Bank” means the Reserve Bank of India constituted under the Reserve Bank of India Act, 1934 (2 of 1934);
12[(pa) “share of discount” means the share of the subscriber in the amount of discount available under the chit agreement for rateable distribution among the subscribers at each instalment of the chit;]
(q) “State Government”, in relation to a Union territory, means the administrator of that Union territory appointed by the President under article 239 of the Constitution;
(r) “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;
(s) “ticket” means the share of a subscriber in a chit.
9. Clauses (ja) and (jb) inserted by the Chit Funds (Amendment) Act, 2019, w.e.f. 1-1-2020.
10. Omitted, ibid. Prior to its omission, clause (m) read as under :
‘(m) “prize amount” means the difference between the chit amount and the discount, and in the case of a fraction of a ticket means the difference between the chit amount and the discount proportionate to the fraction of the ticket, and when the prize amount is payable otherwise than in cash, the value of the prize amount shall be the value at the time when it becomes payable;’
11. Substituted for “prize amount” by the Chit Funds (Amendment) Act, 2019, w.e.f. 1-1-2020.
12. Inserted, ibid.
CHIT FUNDS ACT 1982 –BARE ACT WITH SECTION NOTES
AUTHOR : TAXMANN'S EDITORIAL BOARD
PUBLISHER : TAXMANN
DATE OF PUBLICATION : JULY 2025
EDITION : 2025 EDITION
ISBN NO : 9789371261319
NO. OF PAGES : 64
BINDING TYPE : PAPERBACK
DESCRIPTION
Chit Funds Act 1982 [Bare Act with Section Notes] by Taxmann is a definitive legal reference for the regulation and compliance of chit funds in India. The 2025 Edition presents the fully amended text of the Act, enriched with accessible section-wise notes, explanatory commentary, state amendments, and key judicial precedents. This volume is designed to guide users through statutory requirements, compliance procedures, dispute resolution, and legal safeguards for all stakeholders in the chit fund sector. This book is intended for the following audience:
• Legal Professionals & Practitioners
• Chit Fund Companies & Foremen
• Regulators & Government Officials
• Judicial Officers & Arbitrators
• Academicians, Researchers & Students
• Subscribers, Investors & Public
The Present Publication is the 2025 Edition, covering the amended and updated text of the Chit Funds Act [Act No. 40 of 1982], with the following noteworthy features:
• [Authoritative Text] Full, amended text of the Chit Funds Act 1982, updated for 2025 with all latest notifications and statutory changes
• [Pre-amendment Provisions] Includes previous provisions in amendment footnotes for clarity on pre-amendment law and its applicability
• [State Amendments] Highlights provisions as amended for specific States
• [Section-wise Notes] Practical notes on every section, clarifying scope, compliance, and procedures
• [Case Law References] Select Supreme Court and High Court decisions interpreting key provisions for legal clarity
• [Explanatory Definitions] Clear definitions and illustrations of important terms such as 'chit', 'foreman', 'subscriber', 'discount', 'net chit amount', and 'prized subscriber'
• [Editorial Commentary] Summarised guidance on compliance, penalties, and procedural safeguards
• [User-friendly Format] Structured for ready reference, with subject index, schedule formats, and exhaustive coverage of operative rules
