Difference between Mutual Funds VS Nidhi Company VS Chit Fund?

Difference between Mutual Funds VS Nidhi Company VS Chit Fund?

Nidhi means a company which is incorporated with object of developing the habit of thrift and saving funds amongst its members, it accept and receive deposit only to its members for their mutual benefits. Nidhi Companies are recognized under section 406 of the companies act 2013 as the company belonging to the non- banking Indian financial sector. The basic principle of Nidhi Company is mutuality. And it is also known as permanent fund, mutual fund benefits or mutual benefit company.

Mutual Fund is a kind of investment cycle that is made by the pool of money called investors for investing in the multiple securities. The mutual fund or securities are handled and managed by the mutual fund manager. A mutual fund’s portfolio is structured and maintained to match the investment objective. The mutual fund attempts to provide small or individual investors access to the professionally managed portfolio of equities, bonds and securities.

Chit fund is a sort of saving scheme practiced in India. A chit support company implies a company overseeing, conducting, agent or some other limit, chits as defined u/s 2 of the chit funds act 1982. A chit fund is an arrangement where a group of people agree to contribute money, into a fund. Only members/ shareholders make deposit or take loans, in each of these forms of NBFC.

Document Required for the Nidhi Company:

Proof of the registered place of business (Ownership documents/ rent or lease agreement)

•    No Objection Certificate (signed by the owner/ landlord)

•    Identity proofs

•    Address proofs of the members

•    Photos of the members

•    PAN card copies of the members

•    Digital Signature (DSC)

•    Director Identification Number (DIN) of the directors

•    Memorandum of Association of the company (MoA)

•    Articles of Association of the company (AoA).

Document required for the Mutual Fund:

  • KYC compliance; your PAN must be verified by under the Know Your Customer Norms of the Government of India to be able to invest in the mutual fund.
  • Proof of identity: Any of the following documents are acceptable as proof of identity –
  • PAN with photograph
  • Aadhaar
  • Passport
  • Voter’s ID card
  • Driving licence
  • Proof of address: Any of the following documents can be submitted as proof of identity –
  • Aadhaar
  • Driving licence
  • Passport
  • Voter’s ID card
  • Ration card
  • Registered lease/sale agreement of residence
  • Flat maintenance bill
  • Insurance copy
  • Utility bills such as landline telephone bill, electricity bill or gas bill, less than 3 months old
  • Bank account statement/passbook, less than 3 months old
  • Self-declaration by High Court and Supreme Court judges

The basic difference between Nidhi Company and Mutual Fund:

The main similarity between a Nidhi Company and a Mutual Funds Company is that neither can work without individuals putting resources into them. In any case, many individuals confuse over them, given the way that the Nidhi Company can also be named as a Mutually Benefit Society. Here are a couple of contrasts so you have an unmistakable thought for your investment.

  • Nidhi Company is for the individuals and by the individuals as it were. MF would mean the overall population can contribute.
  • Individuals go for Nidhi Company Incorporation, to build up a propensity for savings, self-reliance, and parsimony among the individuals. In actuality, individuals put resources into MF to win, on their investments.
  • Loaning or obtaining is done from the Pool to its individuals just, in a Nidhi Company. The MF contributes, in the interest of the investors, in a wide scope of Equity/Bonds/debentures/govt protections and so on, to get the most extreme return.
  • In Nidhi Company, the financing costs charged/paid are negligible. The essential goal of MF is to acquire the most elevated rate on the speculations, according to the conditions connected.
  • The Act covering MF is SEBI Act, 1996.
  • One of the major distinctions between the mutual fund and Nidhi Company is that the Nidhi Company is engaged to manage its individuals anyway there is no such limitation on shared assets.
  • The primary target of the Nidhi Company is to build up the propensity for frugality and reserve funds among its individuals. Then again, the fundamental target of the shared reserve is to build the abundance of contributors.
  • The primary idea of business of Nidhi Company is loaning and obtaining of cash among its individuals as it were. Be that as it may, the nature of the matter of shared store is tolerating the stores and making speculations from the cash got from any financial specialists.
  • The Nidhi Company can utilize the measure of deposit received for lending the cash to the individuals as it were. In actuality, the mutual fund can utilize the measures of  got for making speculations or completing the matter of chit fund, hire purchase , renting fund, obtaining of securities and so on.

 

The basic difference between Mutual fund vs chit fund:

  • Chit fund company is known as the committee, it is type of savings scheme in India where fixed instalment is paid by the members over a definite period of time.
  • Nidhi company is the type of non-banking financial company which can take deposit and lend money its members.
  • Chit fund is organized by a company, that only oversees its transaction and charge some interest/ profit, for which, it may, also, appoint a supervisor or agent.
  • Chances of fraud in chit fund is higher, whereas in Nidhi Company is relatively lower.
  • The number of instalments and, thus, the duration equals the number of members in chit fund so that everyone gets a turn.
  • Chit fund schemes are might not get unorganized schemes conducted  among companions and relatives.

Final Say:

To channelize your family savings in the best non-banking finance sector than Nidhi Company is the best. If you need help in Nidhi Company registration, get in touch with us. At, Unilex Business Consultant, we will help you in regarding Nidhi Company incorporation and other related issues.