How Archit Gupta of Clear files his tax returns

Gupta’s portfolio has a mix of equity mutual funds, National Pension Scheme and Sukanya Samriddhi Yojana (SSY), which give him tax-efficient returns
Gupta’s portfolio has a mix of equity mutual funds, National Pension Scheme and Sukanya Samriddhi Yojana (SSY), which give him tax-efficient returns


  • If you think the founder of the country’s largest online tax filing platform does his own taxes, think again

You would think that the founder of the country’s largest online tax filing platform must file his tax returns on his own. Well, Archit Gupta of Clear (erstwhile ClearTax) does not. “Earlier, I used to, but now, I opt for the tax expert-assisted filing option. I still file the tax return myself, but my income tax return has gotten complicated; so, I use assistance to ensure I’ve covered all the bases," said the founder and CEO of Clear during an interaction with Mint as part of the Guru Portfolio series.

Gupta’s investment portfolio has a mix of equity mutual funds, National Pension Scheme and Sukanya Samriddhi Yojana (SSY) that give him tax-efficient returns. However, tax optimization is not the only criterion he considers while investing. He is also invested in fixed deposits (FDs) that provide him with a cash buffer for emergencies and big purchases. Edited excerpts:

What is your investment asset mix and how has each asset performed over the last year?

About half of my investment portfolio is in equity MF and the other half is in bank FDs and Sukanya Samriddhi Yojana (SSY), which compromises my debt portfolio. FDs are my safety nest for emergencies and big discretionary spends.

As for performance over the last one year, I don’t track my investments on a regular basis. My goal is that my investments should work for me over a long-term period of 10 years. If I have to look at the IRR (internal rate of return) of my MF holdings over the last three to five years, it comes to about 15-18%. Bank FD interest rates are between 5-7%.

I own gold jewellery that was gifted to my wife and me during our wedding, but I don’t include it in my investment portfolio. I do not have any real estate or alternative investments. I want to point out that I have made some angel investments as well and if I include it, my equity holding will go up to 70%. But since I have not exited any of them yet, I can’t provide returns.

Can you tell me more about the angel investments?

Most of the startups that I invest in are at the formation stage. Many of them have raised Series A and even Series B, while some have closed down. At some point, I'll have to adjust the latter ones to zero. Overall, my angel investment portfolio is for me to learn about startups and investing in founders. For that reason, I’m less oriented towards returns. I think if I manage to break even and just get the principal back after five to seven years, which will obviously be below market returns, it will work for me. The key thing for me is to learn.

(Graphic: Mint)
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(Graphic: Mint)

What are the categories of MFs that you invest in?

I have one SIP (Systematic Investment Plan) in each of these categories - ELSS (equity linked savings scheme), small-cap fund, flexi-cap fund and one fund that invests in US equities.

Did you start your MF investing journey with an ELSS fund to save tax?

That’s correct. The first investment was in an ELSS fund for the purpose of tax saving.

When was this and do you still hold that fund?

I haven’t liquidated any of my mutual funds. To answer your question, I invested in the ELSS fund in March 2017. It has delivered 9% annualized return.

One investment strategy that has worked for you and one that has not?

I’m satisfied with my investment style of putting in money in mutual funds through SIPs and letting compounding do its job. The monthly automated system of money getting debited from my bank account directly into mutual funds has helped me create a savings and investing habit. It’s not just about the habit, my MF portfolio’s returns with the current approach is a testament of effectiveness of this approach.

The one strategy that hasn’t worked is post-tax returns on FDs. They fail to even beat inflation.

Have you thought about moving from FDs to other tax-efficient debt investment options?

It’s a question I think about every year when I pay my taxes, but then I forget about it. I have a funny relationship with this question.

The short answer is that it does occur to me once every year during the tax cycle but I eventually decide to leave it as it is. Moreover, FDs give me peace of mind that if there is an emergency, the money will be easily available to me. I don't have to think about whether I've hit the three-year tenure of a debt fund for tax efficiency or not. I am sure I can extract higher returns through a debt fund, but I've never gotten to calculate how much more that would be.

Apart from ELSS funds, what are the other tax-saving investments you make?

I invest in SSY for my daughter. The returns are superior to most other debt investment options due to their tax-free nature. The maturity proceeds won’t be taxable either. However, I don’t claim tax deduction on the investment amount as I’ve maxed out Section 80C benefit through other investments. I also make 50,000 contribution to the National Pension Scheme (NPS).

I have a life insurance policy, but that’s not an investment and rather an expenditure. Similarly, I claim tax deduction on my health insurance premiums as well as House Rent Allowance (HRA).

Do you make investment decisions with tax-saving as the primary criterion in mind?

The answer is both yes and no. Some investments are structured in a way that the impact of taxes can’t be completely ignored. For instance, in the case of MFs, compounding happens on unrealized gains and I don’t have to pay taxes until those gains are realized. This is not the case with FDs. TDS is deducted on FDs every year and the amount deducted doesn’t earn compound interest. Since the tax incident in the case of FDs is at the moment the income is earned, it is way more tax-inefficient compared to, say, a mutual fund and hence, the tax implication can’t be ignored. While I don’t make investments to claim tax deduction because my 80C limit is exhausted with my existing ELSS investment, I do consider whether my money in a particular investment will compound without being taxed every year or not.

You and your wife recently became parents. How has this change impacted your financial planning?

Yeah, it’s a big change in our life and it has triggered a little more financial planning on our part. In fact, the first event of our marriage prompted us to more actively plan our finances and this second milestone has further increased the focus on financial planning.

Is your spouse involved in the family's finances and how?

She keeps a peripheral understanding but has outsourced the responsibility of execution to me. She is aware of where the money is being directed and the rationale behind it but we have a demarcation of responsibilities and this one is on me.

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