The First India-Focused Startup in Y Combinator, This Dropout’s Venture Files 3 Percent of India’s Tax Today

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The year was 2010, and Archit Gupta had just returned from San Francisco. The startup he was working for, Data Domain Inc, got acquired by EMC for a whopping $2.4 billion. An alumnus of IIT-Guwahati, in 2008 he had dropped out of his PhD course from University of Wisconsin to join the startup.

Returning home, to Delhi, Archit’s father, a chartered accountant, was pointing out the lack of information while tax filing. This prompted Archit to look into the idea of starting a tax e-filing platform. Days after, he relocated to India, and started up from his garage.

Archit’s guideline was simple: ‘Make no mistakes in people’s taxes’.  And, after five years, that statement still holds strong as one of the guiding principles for his venture, ClearTax.

Within 10 days of launching, in March 2011, ClearTax was flooded by 1,000 people wishing to file their taxes through the platform. It was a clear validation of the times to come.

Archit is helped by Ankit Solanki and Srivatsan Chari, whom he met at a hackathon, hosted by him for Paytm in September 2011.

ClearTax co-founders (Ankit Solanki, CTO, Archit Gupta, Srivatsan Chari, VP, Business and Operations) with Geoff Ralston at YC in 2014
ClearTax co-founders (Ankit Solanki, CTO, Archit Gupta, Srivatsan Chari, VP, Business and Operations) with Geoff Ralston at YC in 2014

Easing the filing process

ClearTax helps individuals to prepare and file their taxes.  Users have to submit their Form16 on the platform, which automatically sieves the necessary data required.  This saves users time spent in manually crunching and feeding data.

Further, ClearTax’s unique ability helps it to compete with the government tax filing website. It takes about 12 minutes for an average user to complete the process of filing, as opposed to the two hours through the traditional route. The platform also provides assisted services through CAs and tax experts, serving as a marketplace for the same.

ClearTax charges Rs 600- 13,000 for hiring experts. The value increases with the complexity of the tax filing, Archit says.

ClearTax also has interactive content for users on its platform to better understand the process of tax filings.

So what is the difference between the website by tax department and ClearTax?

Calculations on ClearTax are automated with losses adjusted for the next year. With no calculations required, what is needed is just the price and date of sale or purchase.

ClearTax claims that a three percent of India’s taxpayers e-file their taxes on its platform (about 10 lakh out of the total 3.4 crore tax filers).  The firm also has 10,000 CAs and experts registered, with close to 70 percent of the users coming from metro cities.

Additionally, the founder claims ClearTax to be the only platform in the country which has tax on the cloud. This gives individuals ease of usage from any part of the world.

Tax for businesses

Being a SaaS provider, the platform offering ClearTDS helps businesses to prepare their TDS returns, followed by quarterly withholdings. As of now, ClearTax’s software is used by 5,000 companies, both big and small.

Pricing for the B2C side depends on the complexity of these filings, followed by the size of the business.  Apart from these submissions, the software also provides intelligence around validation services (like PAN of employees) and pay package optimisation for tax savings.

The average pricing of the software can be Rs 2,700, and go all the way up to Rs 45,000.

The ClearTax Team
The ClearTax Team

Technology for tax    

Having a proprietary technology, the platform is powered by a distributed system. The beauty of it being that it can be scaled on the cloud during peak demand, owing to the seasonality of the business.

The platform has three layers of checks enabled by technology. First, warns customers in case something calls out for a notice by the tax department.  The second is actual comparison, where the taxes filed are compared with the government guidelines of calculations.  The third entails hard warnings, wherein when a filing looks fishy, ClearTax takes a call whether to proceed or not.

The firm at present is putting a lot of its investments in machine learning, while aspiring to automate the process of invoicing, bill recognition and data extraction.

By 2014, the company became the first Indian startup to be selected by US-based seed accelerator Y Combinator.

Archit Gupta
Archit Gupta

Taxing in the future 

On aspirations for ClearTax’s future, Archit tells us that the goal is to work with one lakh businesses and 50 lakh customers by the end of this financial year. He also hints at the possibility of venturing into the tax-saving space.

On Friday, the company announced the hiring of three former core members of Flipkart – Prasanth Nair, Director (Fulfilments), Flipkart; Jai Santosh, the man behind Flipkart Lite; and Akash Bapna, one of the early employees of the e-commerce giant. Prashanth will lead engineering while Jai and Akash will look after newer business areas and consumer business segment for ClearTax.

Tax filing is a niche segment, with some players like Makeyourtax.com and Taxmantra already functioning in the space. So, either these firms prod towards the financial advisory segment, or strengthen their own offerings and work within their niche. ClearTax is doing exactly that in its strategy.

But with newer startups spending as much as a lakh for auditing and income tax filing, there seems to be enough scope and business opportunity for players to tap into this space.  However, functioning with a niche, it will be interesting how ClearTax disrupts this space and achieves scale.

Source: yourstory.com

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