Is Cleartax Profitable? How Does ClearTax Work & Make Money?

ClearTax has become a top player in India’s financial technology scene. But it didn’t happen overnight! Over a decade ago, doing taxes was a real pain for regular folks and professionals alike. ClearTax made things easier by providing smooth services like tax prep, online filing, accounting, and investment advice for both people and businesses.

Now, this leads to an obvious question- Is Cleartax profitable? If yes, then how does it work and make money?

Go through this write-up and you’ll find out!

(A) ClearTax: Profile Overview

ClearTax is a financial technology company based in India that specializes in tax-related services. It offers a range of solutions to make tax filing and related financial tasks easier for individuals and businesses.

Before diving deeper into the discussion, let’s briefly look at its profile-

Note: We have compared “Taxbuddy vs Cleartax” thoroughly. You can check out the article for detailed information.

(B) Working Strategy: How does ClearTax work?

ClearTax isn’t just another tax-filing platform; it’s your go-to solution for navigating India’s complex tax system with ease. How? By offering a range of financial technology solutions focused on income tax filing, GST, and mutual fund investments. With a user-friendly interface, ClearTax aims to simplify financial tasks for Indians, ensuring easy access through a seamless login process.

Let’s decode- How does ClearTax work?

(B.1) Simplification of Tax Filing Process

For individual users, ClearTax simplifies the tax filing process. Users start by uploading their Form 16 PDF, which the software then reads and automatically fills out the tax returns. This eliminates human error and speeds up the filing process, providing fully prepared tax returns within seconds.

(B.2) Advanced Technology

ClearTax’s proprietary technology powers software for Chartered Accountants (CAs) and tax experts. It allows them to check filing status, select the correct ITR form, and import TDS/TCS/self-paid tax entries automatically, eliminating manual data entry.

(B.3) Handling Complex Scenarios

Life can throw some curveballs, like job changes or forgetting to claim deductions. But fear not! ClearTax has your back. Whether you’re juggling multiple Form 16s or missing out the HRA deduction, ClearTax has the tools to set things right. Plus, it can help you with everything from tax refunds to capital gains calculations, ensuring you get every rupee you’re owed.

(B.4) ClearTax Business Model

ClearTax operates on various models, including Business-to-Consumer (B2C), Business-to-Business (B2B), and Business-to-Government (B2G). It primarily charges for filing services, utilizing a self-e-filing-based revenue model with freemium offerings. Revenue streams also include services for Chartered Accountant-assisted tax filing and concierge-like services for Non-Resident Indian (NRI) tax returns.

In other words, ClearTax simplifies income taxes for individuals, offering clarity and assistance throughout the filing process. Its technology supports Chartered Accountants and tax experts, streamlining tasks like form selection and data entry.

(B.5) NIL GST Return Filing

ClearTax introduced the NIL GST Return Filing feature to simplify GST filing for small businesses and professionals. The process, facilitated through the ClearTax GST Desktop App, automates filing, saving time and effort.

(B.6) Import & Process Transactions

ClearTax can effortlessly import and process thousands of transactions from your profit and loss (P&L) report. It accurately determines capital gains, even categorizing intraday transactions as business income

(B.7) Expanding the Services

ClearTax, rebranded as Clear, now offers additional services like ClearTax GST, ClearE-invoicing, and ClearServices, catering to various financial needs. It also partners with crypto exchanges to assist users in managing cryptocurrency portfolios and taxes, positioning itself as a comprehensive financial solution provider in India.

Apart from all these things, ClearTax also offers numerous Products, Resources, Guides, and Tools. We have already covered this part in the table given in the ClearTax profile section.

(C) Revenue Model: How does Cleartax make money?

Before diving into the revenue model of ClearTax, let’s look at the growth of ClearTax in terms of Revenue, Individuals, Tax Professionals, and Enterprises-

Source: The data has been collected from- Forbes, Entrakr, and Inc42.

Now, let’s discuss the revenue model part. ClearTax, a leading player in India’s fintech sector, has a diverse range of revenue streams which are described below-

(C.1) Tax Preparation & e-Filing Services

ClearTax earns a significant portion of its revenue by offering tax preparation and e-filing services. Individuals and businesses utilize their platform to file income tax returns and ensure compliance with tax regulations. ClearTax assists users in calculating their tax liability and electronically submitting returns, generating revenue in the process.

(C.2) Accounting Solutions

Businesses subscribe to ClearTax’s accounting software and tools to manage their financial records efficiently. These services help streamline accounting processes, reconcile transactions, and generate accurate financial reports. ClearTax earns revenue through subscriptions from enterprises looking to maintain accurate books and comply with financial regulations.

(C.3) Investment Planning Solutions

ClearTax provides investment-related guidance and tools to help users make informed decisions. They may earn revenue through partnerships with financial institutions or by offering premium investment advisory services. Users can explore investment options and assess risk profiles, contributing to ClearTax’s revenue stream.

(C.4) Enterprise Services

ClearTax’s focus has shifted towards serving enterprises, offering specialized services like GST compliance and payroll management. Businesses pay for these solutions to ensure regulatory compliance and streamline their operations. ClearTax’s B2B offerings contribute significantly to its revenue stream, catering to diverse business needs.

(C.5) Consumer SaaS Business

ClearTax monetizes its consumer software-as-a-service (SaaS) business, deriving revenue from both B2C and B2B clients. While it started primarily as a consumer-oriented platform, ClearTax now earns a substantial portion of its revenue from B2B clients. This shift has expanded its revenue base and strengthened its position in the market.

(C.6) GST Services

ClearTax processes a large volume of GST transactions in India, making it a major player in this domain. Enterprises rely on ClearTax for GST compliance, return filing, and related services. ClearTax’s expertise in GST services contributes to its revenue stream, catering to the needs of businesses in navigating complex tax regulations.

FY23 was a golden year for ClearTax! Reason? Their revenue jumped over 85% to cross Rs.100 crore. That’s quite remarkable for a Fintech platform… but was it equally profitable too? Go through the next section, and you’ll find out!

(D) Is ClearTax Profitable?

Let’s look at the financials of ClearTax for the last three fiscal years-

Based on the financial data provided, ClearTax has experienced significant revenue growth over the years, with revenues increasing from Rs. 58.26 crore in FY21 to Rs. 108.8 crore in FY23. However, expenses have also risen substantially, outpacing revenue growth. Despite this, the company has managed to control the rate of expense growth, with expenses increasing from Rs.180 crore in FY21 to Rs.343.7 crore in FY23. 

Coming to your question- Is ClearTax Profitable? 

Unfortunately, the answer is “No,” ClearTax is not profitable!

As you can see, ClearTax has not yet achieved profitability, as indicated by the net losses incurred in each fiscal year. The losses have escalated from Rs.118 crore in FY21 to Rs.233.5 crore in FY23. Therefore, ClearTax is not currently profitable.

(E) How Effective is the Business Model of ClearTax?

ClearTax’s business model demonstrates effectiveness in several key areas, despite not yet achieving profitability. 

Firstly, its diversified revenue streams, encompassing tax services, accounting solutions, investment planning, enterprise offerings, consumer SaaS, and GST services, provide resilience against market fluctuations and cater to a wide range of financial needs. This diversification minimizes reliance on any single revenue source, contributing to long-term sustainability.

Additionally, ClearTax’s shift towards serving enterprises reflects an understanding of market demand and positions the company for continued growth. By offering specialized services such as GST compliance and payroll management, ClearTax taps into lucrative business segments, expanding its revenue base and strengthening its market presence.

Furthermore, ClearTax’s commitment to innovation and technology adoption enhances its competitive advantage. Its user-friendly platform, coupled with advanced software solutions, simplifies complex financial tasks for individuals and businesses, driving customer satisfaction and loyalty.

However, despite these strengths, ClearTax faces challenges in achieving profitability, as evidenced by escalating losses in recent years. Addressing cost management and efficiency, alongside revenue growth strategies, will be crucial for ClearTax to realize its full potential and establish itself as a sustainable and profitable player in the fintech landscape.

(F) Future of ClearTax

Even though ClearTax has been grappling with losses lately, its determination to innovate and grow has made it a major player in India’s fintech scene. How? By branching out into services for big businesses and meeting a wide range of financial needs, ClearTax is beefing up its income sources and inching closer to making a profit.

With each step forward, they’re growing closer to turning their losses into gains. And with their finger on the pulse of India’s ever-evolving financial landscape, ClearTax is set to carve out an even bigger slice of the pie in the future!