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Is ChitFund Dividend exempt?

Indudhar (Tax Advocate) (427 Points)

19 June 2009

Dear Freinds

Is Chit Fund dividend exempt from Tax?

And Is Chit Fund Bid loss can be claimed as expense in P & L A/c

Please help me out..

Thanks in anticipation..

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10 Replies

Prem Kumar (Articled student--Final) (375 Points)
Replied 19 June 2009

if the chit fund is the registered company under companies act then yes. there is no other provision in income tax act for chit funds.

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Anumanchipalli Sathikonda (Tax Consultant) (1559 Points)
Replied 19 June 2009

Andhra Pradesh High Court in the case of CIT Vs. Kovur Textile 136 ITR 61 has held that chit fund bid loss is a business loss and chit dividend is an income. Hope your problem is solved.

Sathikonda

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Anumanchipalli Sathikonda (Tax Consultant) (1559 Points)
Replied 19 June 2009

Andhra Pradesh High Court in the case of CIT Vs. Kovur Textile 136 ITR 61 has held that chit fund bid loss is a business loss and chit dividend is an income. Hope your problem is solved.

Sathikonda

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Anumanchipalli Sathikonda (Tax Consultant) (1559 Points)
Replied 19 June 2009

For clarification of all

Dividend earned by contributing to a chit or participating in a chit is taxabale under income-tax act. It is not a dividend declared by a company to its share holders. Please note this point.

Sathikonda

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RAVI ADARI (PARTNER) (23 Points)
Replied 09 September 2009

the chit amout if it is used for business and chit loss is claimed then the chit dividend is also taxable. If it is purely used as a savings instrument then the loss is not allowed as well as dividend is not taxable .It is treated as capital loss and capital receipt

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CA CS CIMA Prakash Somani (Landmark Group) (23502 Points)
Replied 09 September 2009

Agreed.

Originally posted by :sathikonda anumanchipalli
"	Andhra Pradesh High Court in the case of CIT Vs. Kovur Textile 136 ITR 61 has held that chit fund bid loss is a business loss and chit dividend is an income. Hope your problem is solved. Sathikonda	"

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Indudhar (Tax Advocate) (427 Points)
Replied 10 September 2009

Originally posted by :RAVI ADARI
"	the chit amout if it is used for business and chit loss is claimed then the chit dividend is also taxable. If it is purely used as a savings instrument then the loss is not allowed as well as dividend is not taxable .It is treated as capital loss and capital receipt	"

Fact is quiet interesting Ravi..

Can you please enlighten the same with sections..

rajasree.prasanna (Article ship) (31 Points)
Replied 19 November 2013

can any one describe which divends are fully taxable and which are exempted as per it act..

Rupesh Srivastava (Business) (2392 Points)
Replied 10 April 2014

Dear All,

As per recent ruling reported in (2014) TaxCorp(LJ) 2708 (HC-MADRAS)

Chit dividend received taxable u/s 28(iii) - Mere participating in a scheme offered by the third party, wherein others also joined, does not, in any manner put forth a principle of mutuality.

Rupesh Srivastava

PH: 09986028041

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Muralidharan (Chartrered Accountants) (115 Points)
Replied 20 April 2021

I agree with Rupesh Srivatsava that the chit dividend is taxable and the Loss if any unless the person contributing the same is offering any business income and has utilised this chit fund for business purpose, the difference between the amount contributed and final amount received cannot be claimed as a Loss as the same is a capital loss only ( NO LT also) and of course dividend is taxable during the years in which the amount is received.