How is the maturity on Chit funds taxed? Is it tax free for the payouts received?
Hello @AJ_cubehead98
Chit fund maturity proceeds are not tax-free in India. The difference between the total amount paid and the amount received is treated as Income from other sources and is taxable under the Income Tax Act.
@Swapnil_Agarwal but how this can be calculated. Chit sometime go multi years.
In case of 5 year chit, If I am taking money only at 5th year, then can I deduct all my previous year contribution and pay for excess money?
Expanding that question, if I took money in year 1 itself and my payments will go till 5 years. Now how taxation works
In the first case, any excess amount received over the total contributions will be taxable. In the second case, if the amount received is at a discounted value and the total received does not exceed the total contributions made, there will be no actual gain - hence, no tax liability arises.
Hope this helps!