A few weeks after PayPal resumed the money transfer operations to India (and enforcing some compliance via PAN Number & reason disclosure for PayPal money transfers), they have gone even stricter now! Basically, the RBI (Reserve Bank of India) has enforced this new compliance policy on PayPal India whereby all money received via exports need to be withdrawn to respective Indian Bank accounts of the individuals within 30 days of receipt of the same.
Exports, in this context, is anything like money received for online services, blog income, sale of products on eBay etc. Basically what it means is that you have to disclose and withdraw your income as and when it is received and you have to swipe your credit card for any new purchases. The details of the new RBI regulations as listed below:
(You might have already received this communication from PayPal India)
- Any proceeds or earnings received into your PayPal account from the export of goods and services should be withdrawn to your bank account within 30 days.
- While making the withdrawal please make sure you select the purpose code that best fits your business (Note: This was already in place)
- Any proceeds or earnings received into your PayPal account from the export of goods and services may only be withdrawn to your bank account in India. This received amount cannot be reused for making purchases.
- If you would like to make purchases on any website that accepts PayPal, you can continue to use any credit card issued by a bank in India.
In brief, whatever you earn online cannot be ‘recycled’ but withdraw immediately to your Bank account. If you want to use PayPal for paying your online purchases or services consumed, but you have to use your credit card. Basically, the government can now not only track how much money you made, but also make sure that you don’t keep that forever in your PayPal account and consume later at your convenience. They are quite smart, aren’t they? The other advantage for the RBI is that the money received in USDs or other foreign currencies will be converted into Indian Rupees at much the same exchange rate as it was received. This will certainly bring in a lot more stability to the Forex system though it can be hard on the online freelancers. For the income tax department, it is going to be as good as TDS (Tax Deducted at Source) and the entire online story works pretty well for them.
What does it mean for all of us?
As I mentioned in my last post on this topic, one needs to strictly pay taxes for what they earn. Henceforth, you will be frequently monitored for your online activities that make money. You will be in the RBI’s radar surveillance much more than those who make money in INR (e.g. Google AdSense income paid as Indian Rupee checks) because you are earning Forex sitting here in India.
In my opinion, all other money transfer services will also be brought under these rules as well. However, I am a little bit concerned about the compliance date for the current balance in PayPal India account. Not sure if there’s any date before which you have to withdraw it all. Any idea, folks?
Happy Money Making!