Remember the March madness? Every year around February-March, employees across all companies are in a mad scramble to take out printouts and ‘manufacture’ bills to save that last bit of tax. They do this as a last-minute measure and often lose out due to lack of planning. As per a study, an employee spends an average of 23 minutes just to submit a single bill claim. With an aim to make every day corporate and employee-related processes easy and efficient, serial entrepreneur Bhavin Turakhia and Ramki Gaddipati started Zeta in 2015. This Bengaluru-based FinTech startup offers digitised enterprise solutions for employee tax benefits, automated cafeterias, and digital payments. Gaddipati, co-founder and CTO, Zeta, in an interview with Kumar Shankar Roy gives tips on zero-paperwork and 100 per cent compliant approach to managing employee tax benefits and allowances, reveals ways on saving taxes by using reimbursements and how the company is using latest technologies to edge past competitors. Read to know more.
Tell us about Zeta's business model, major milestones, investors and offerings.
With an aim to make every day corporate and employee-related processes easy and efficient, Bhavin Turakhia and I co-founded Zeta. Since inception, we have disrupted India’s digital payments space with a range of offerings that are easy, inclusive and valuable for corporations, employees, and merchants everywhere. From employee tax benefits to automated cafeterias and gifting, every product revolves around a central idea; spending and receiving money should be easy, fast and hassle-free.
Today, we have over 13,000 corporate clients with over 1.4 million salaried employees. Our current run rate is roughly 16 million transactions per month. We are roughly adding about 239 corporates every month, which means about 8 corporates a day. Currently, we are present in 11 locations across India, and are planning to expand all over the country and aim to have 2.5 million employees in FY19. Over the years, we have forged partnerships with leading players such as Sodexo, RBL Bank, IDFC Bank, Cnergyis, Infotech, Kotak Mahindra Bank and Aon Hewitt among others. Zeta is a completely bootstrapped startup.
Owing to major misconceptions, employees shy away from tax-saving reimbursements. Why does it happen and what can be done to solve this?
Earlier this year, we launched the Zeta Nielsen Employee Benefits Study, a survey covering 194 companies and 1,233 employees across India, taking an in-depth look at employee tax benefits. It revealed that 62% employees feel claim submission is time-consuming; as an employee spends an average 23 minutes just to submit a single bill claim and 41% employees need to submit one claim form per claim. It’s a vicious cycle; employees have to store bills, find them when needed, spend time filling it and physically submit the bills to the finance team, wait and then keep following up. It’s so complex and time-consuming, leaving employees to opt out of the process altogether.
Thankfully, India is changing gears swiftly, becoming a digitally-driven nation. It’s only fair that organizations need to evolve in their processes as well. When the majority workforce in India will have access to automation, digital transformation will ensure faster processes, significant cost savings for companies and benefits for employees.
Do you think that employees' worry about paperwork forces them to avoid reimbursements? But are zero paperwork solutions compliant in tax laws?
As mentioned earlier, 62% employees feel claim submission is time-consuming; as 23 minutes is spent just to submit a single bill claim forcing an employee to avoid filing reimbursements. However, our study also revealed that 90% employees prefer a fully digital reimbursements process.
The government is also working towards bringing in digitization to these processes, an example being the revised RBI guidelines that said existing paper vouchers will not be valid beyond Feb 28, 2018. It also said that companies that are issuing meal vouchers under B2B arrangements in paper voucher form will now have to issue them in electronic form, including cards. So with the government backing these processes, zero paperwork solutions are compliant in tax laws
Give some examples of how tax-saving reimbursements are advantageous compared to an employee who avoids such reimbursements?
Reimbursements and benefits is a component of a salary that is tax- deductible against certain expenses made and bills submitted. It includes benefits such as phone, LTA, Books, and Meal reimbursements etc. If more employees opted for these reimbursements, they could get more net salary every year. According to the study, One in every four employees is not aware of the tax savings potential offered by employee benefits that form part of their salary breakup.
Because the money isn’t credited along with the monthly salary, there’s a sense of loss that employees perceive. Ironically, employees opt out thinking they’ll get more money every month only to achieve the opposite result. They get a notional benefit in the present but end up forgoing a real monetary benefit in the future. Companies should make tax experts accessible to encourage employees to really understand their salary structures and enable them to sign up for reimbursements. As their salaries climb, there’s a potential annual saving of close to Rs 80,000 as a reward for this long-term thinking.
The financial year and tax saving investments season will come upon us in a few months. Tell us about the sops given by the Income Tax department that many don't know about.
Employees must be aware of the most common tax exemptions that they have access to under 80C, some more options beyond 80C that they can leverage to reduce their taxable income are-
1. Communication allowance: Under current laws, salaried employees can use spends on mobile bills to save on tax.
2. Meal allowance: By spending through meal vouchers or claiming these expenses as tax benefits, you can add another Rs. 4,500 in tax savings.
3. Leave Travel Allowance (LTA): With LTA, employees can claim travel expenses for themselves and immediate family.
4. House Rent Allowance: If employees live in a rented house, they can claim HRA to lower their taxes. Subject to certain rules, it could either be partially or wholly tax-exempt.
5. Fuel and Driver’s Salary Reimbursement: Employees who operate their own vehicles can claim monthly fuel costs up to Rs 1, 800 for a car with an engine capacity below 1.6 litres and Rs 2,400 if the capacity is over 1.6 litres. Driver’s salary is exempt up to Rs 900 per month.
6. Books & Periodicals: With this claim, employees can purchase books, newspapers, periodicals and other relevant literature and get reimbursed on the bills.
There is a growing trend for digital gifting. How is this a win-win for employers and employees?
Corporates are now recognizing that to feel valued at work, employees need to know that their hard work is acknowledged. Hence, no matter how small or big a company is, employee gifting becomes integral to employee motivation programmes. But, times are changing and with the growing diversity, traditional gifting options such as sweets and dry fruits are no longer cherished and the logistical nightmare of getting these gifts in bulk, storing and distributing gets added.
Digital gift cards are gaining momentum as it offers the freedom to choose a gift of their liking, and on the corporate front, logistical hassles and pilferages issues are completely eliminated. In a dipstick study of 1,712 Zeta® users, we found that 92% employees look forward to receiving gifts from their company and 46% prefer online gift cards followed by 32% preferring a cash bonus.
From a technology perspective, how can Zeta leverage emerging areas like machine learning, artificial intelligence, and predictive analytics to offer better products? How would employees of your clients benefit from this?
Our focus was to make payments inclusive and we have driven innovation in this space using technology. Zeta supports multiple modes of payments via the app as well as physical cards, NFC and RFID-enabled devices. Our claims processing is powered by machine intelligence with human feedback loops constantly improving the level of the machine intelligence. It eases the process of uploading a claim for reimbursement to just a click of a photo for the employee.
By using latest image processing techniques and machine learning algorithms, Zeta biller system extracts the data (like “Merchant name”, “GSTN”, “Bill amount”, “transaction date”) from the uploaded bill images. Extracted data further goes into Zeta rule engine to ensure that bills are aligned to the spend guidelines defined by the Corporate. Based on this automated analysis, various workflows (like sending out notifications to various stakeholders involved about the claim approval etc) for bill approval process automatically get triggered from the Zeta system. After execution of these workflows, the claims are settled into the user's cash card. Whether it’s our payment systems or the way people submit reimbursements, Zeta has managed to break the status quo and introduce innovation in regular mundane activities that benefit the user significantly.