PayPal India & RBI for Stricter Money Transfer Regulations

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of India) has enforced this new compliance policy on PayPal India whereby all money received via exports need to be withdrawn to respective Indian Bank accounts of the individuals within 30 days of receipt of the same.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  • Any proceeds or earnings received into your PayPal account from the export of goods and services should be withdrawn to your bank account within 30 days.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  • Any proceeds or earnings received into your PayPal account from the export of goods and services may only be withdrawn to your bank account in India.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!


  1. >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.

    You mean from the date when the payment appeared in my account?

    >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.

    Does it mean, we cannot make any purchase via PayPal?

    • As I understand, all money received should be withdrawn within 30 days and fresh purchases can be made via CC linked to your PayPal account. Basically, meaning fresh supply of funds than rotating.

    • Latest advice states that the amount of each inward transaction (credit) in Paypal acct has to be of $500 or less. And this freshly deposited daily balance has to be transferred automatically next day into indian bank acct.


  3. Hi Ajith, can you please disclose the source of this info. There is no update of this sort on paypal blog.

    If this thing is implemented, it would be a big issue as I frequently spend money directly from paypal. Maybe its time I start looking for an alternative.

  4. I hadn’t received the email from paypal yet, this post came in time.

    I charged all my online account from my paypal and bought a couple of domains that I was thinking of buying anyway.

    I dont have a Credit card, so this is a pain for me.

    Also no more tax free purchases from ebay.

    Go ahead and fill in all your online accounts (like, etc) with credit. 😉

  5. Hey, I was the first one to blog about this as soon as my friend received same kind of email. But later on, it was proved that it was a phishing attempt and the mail wasn’t from paypal. Moreover, if something like this was there, paypal would’ve informed every customer and also would have updated the info on their blog. So chill, there’s nothing like that 🙂

    • Lol, Anyway, Lot of work got done just because of the emergency. Some of them, I would never have done 😛

    • @Rishabh, After seeing a couple of posts on the phishing attempt story, I have contacted PayPal to know the truth. Let me wait for their reply and update you all.

      A similar policy is in practice with PayPal South Africa etc (You can read it on your PayPal homepage -> Policy Updates). I wouldn’t be surprised if it’s being implemented in India as well.

      Anyhow, let me wait for an update from the support!

  6. Ajith,

    In Gmail, under labs, there is an app called “Authentication icon for verified senders”. Enable that and see if the sender is verified. Just a check 🙂

  7. I want to say “RBI played a wise game !!”

    • Definitely it is one great step to curb unmonitored foreign currency inflow. India is a highly regulated market and that is one of the reasons why we didn’t suffer too much from the economic recession.

  8. @Folks,
    It was not a phishing mail. I received the following reply from PayPal Support team.

    Dear Ajith Prasad Edassery,

    Thank you for contacting PayPal.

    Yes, it is an email from PayPal. All proceeds received into an Indian PayPal account balance from the payment of goods and services should be withdrawn to your bank account. When withdrawing funds to your bank account, and you will need to select the Purpose Code relevant to your business. The purpose code helps your bank furnish information that may be required by the Reserve Bank of India to identify the nature of the cross border transaction. Please feel free to withdraw funds to your bank account. Additional information will be communicated via an email.

    If you require more information other than what I have provided, you can also give us a call and we will try our best to give you immediate answers. Thank you for choosing PayPal for your online payment needs. We appreciate your business.

    PayPal, an eBay Company

  9. Update: I too haven’t received any such email notification but read an article on DP forum that its a phishing or prank mail. Proof is also given there.

    @Ajith, The email reply you got doesn’t says that you cannot spend from Paypal. May be the representative has not understood fully about your query.

    In the mean time check

    • @Rohit, however I had clearly asked them whether this 30 day withdrawal norm is true. And they replied yes (well, they explained the reason for withdrawal a bit too much though)

      However, when I checked the email source code, I found that the PayPal logo image is coming from a difference domain… Looks like phishing attempt now 🙂 Unfortunately, the PayPal support team says it’s a genuine email from them 😆

  10. I really don’t understand RBI regulations. I am making about $100 a month. I have plans to collect these amount for 3 to 5 months and invest in other plans online. Now I can’t do that……..
    So I think I should leave thinking of online income and get a job. But what the f.. there are NO JOBS IN GUWAHATI.
    What the hell is wrong with RBI. Can’t they see that no everyone here is an exporter or seller who is making a lot of money.
    A person earning Rs 4500 a month doesn’t pay tax coz he can’t nor does he keep credit card.
    Geez for crying out loud People are trying to make a living.
    And everyone would agree with me when I say earning online is not easy. After putting all that effort and I was just starting to stand up online RBI just broke my legs.
    Kudos RBI, before you never existed for me Now you are just a money sucking organization for me.

    • @Rocky, the goverment is doing their job and it’s up to us to follow the norms which should be towards stabilizing our economy which is rocking at the moment! Anyhow, even if you withdraw money to your bank, you are safe because smaller income groups anyhow do not come under taxing.

      As for the job opportunities in the North east, I agree, this has to be tackled in a different way.

  11. I am using paypal for my infolinks account, paypal’s dollor conversion is not good, its low, infolinks now offering Payoneer card, i just applied for the same.

  12. RBI is becoming stricter day by day…
    by the way, can anyone tell that if i had got some cash as a prize of some contest in the blogosphere, do i still need to withdraw it as soon as i receive it or this policy is for the exports section only…..

  13. This is truly ridiculous !!

    I see it more of like PAYPAL being profiter. Now that every foreign transaction has to be converted into INR, due to the fact that Paypal conversion is terribly awful from our end, Paypal will raise more $$$ from the conversion.

    My basic point is why do have to suffer from these conversions? Instead I’ll use them for purchases.

    I appreciate RBI taking appropriate measures to regulate foreign currency flow in India.
    But, why does RBI always have to concern with illegal money? It seems like they don’t bother about the legitimate money that comes to India. At least for now.

    I really don’t understand why we are not allowed to spend our HARD earned money?
    Either allow us for making online purchases or at the least concern make PAYPAL have a better conversion.

    What happens to the current balance? are these rules applied …?

    • @Rohan, RBI doesn’t stop you from spending what you earn. It’s just that you need to declare your earnings via withdrawal process and spend from fresh funds in order to help them keep track of it. If you do not withdraw to your bank, they aren’t really going to know what kind of money and how you are earning it.

      • Don’t you think withdrawing from paypal to bank and again funding money to paypal is not gonna be an easy process?

        Paypal is meant to be an online money transaction method. Withdrawing money from Paypal is ok for me.
        But, why can’t I they just allow to buy something from paypal (of course money earned through foreign currency).

        This is not a good way to deal with Freelancers. It’s just RBI to work with Paypal in that matter.

        All I’m doing is legitimate work basically 🙂

  14. This is a major headache for the honest hard working freelancers. I make websites and like to purchase domain/hosting svcs with my Paypal funds. My account is unverified cuz I can’t get a credit card cuz I don’t live near a major city – Paypal has no idea how difficult it is to obtain a CC here. Also, with unverified account I can’t necessarily pull all my funds into the bank within a 30-day period due to limits. I’ve been patient about PP working things out but now wish there was an alternative…keeping my fingers crossed. But this is really so unfair to the working class…the people who hold India together.

    • @Janu, most tax laws are deemed to be ‘unfair’ on the working class. However, the government has the right to monitor and come up with appropriate rules to curb money laundering & illegal deeds in the larger interest of the nation and it’s financial stability

  15. Thanks for the information.

    I didn’t know about this.

    I haven’t withdrawn from paypal form longtime.

    Does it mean i can’t withdraw the amount that is lying in my paypal account?

  16. hello guys i need help … can i load up my paypal account??

    • What did you mean? Is it about ‘funding’ your PayPal account?

      You can link your PayPal account to a Credit card so that it’s charged everytime you want to make a purchase.

  17. Thanks Ajith, My understanding of Paypal is so much clearer now. I am really new to this so one more question: How do I get customers to pay by credit card online direct into my guest house business in India and what are the Government rules regarding this? Does one generally go through paypal because it is more secure?

    • @Kakoli, for CC payments you don’t need to use PayPal. People use PayPal because it can ‘store’ your funds in a secure way and it can solve disputes easily. Credit cards are used when you need credit and lower transaction charges. CC payment needs to be faciliated by your sales pages whereas PayPal do not require to have your own website for the same.

  18. Ajith Prasad, you seem to be pretty supportive about what the government or RBI does about paypal and all the freelancers giving their best to earn money. Let me ask you one question…. RBI seems to be very concerned about the people earning through paypal. Why doesn’t it do any thing about the 6 trillion dollars of Indian Black money that exist in foreign banks. And yah when you talk about government, you are talking about ministers. I don’t even have to start criticizing them. Its a lost cause….
    The way RBI is changing and making rules, they think people are earning online because of them. What did RBI do to help people earn online.did they bring in some websites to help people to earn online. did they bring in any payment processor.
    nobody has any problem to pay fees or tax, but tax or law has to be make taking every factors in account. Just making rules is a sign of a Dictator.

    One more thing because of RBI rules Alertpay won’t pay to India. And sooner or later Paypal would also stop. I hope what rules would RBI bring in then.

    • @Mousumi, I am definitely supportive of the government and the money regulations of this country. It’s those regulations that’s bringing in financial stability to India that even many developed nations do not have. I do not want to talk about black money here but I try my trivial level best to support the genuine money transfer system and rules there in.

      As for Alert Pay, if they cannot disclose how forex is coming to India through their customers, they better close down the business.

      Now the question to you is just because some fraud politicians pile up black money, invest it abroad or evade taxes, do we – younger generation – need to necessarily do the same? 🙂

      What I expressed are my personal views as a responsible citizen and tax payer. Others may disagree.

  19. My dear friend, if you know anything about earning online then you would know that Every online business is shifting to alertpay, on what basis do you write such BIG sentences. Is it just because you have a blog to worry about.
    And a few politicians, ok out of the 6 trillion dollars almost half belongs to politicians. And when did I say say that the younger generation should follow the same path. And you say younger generation as if its a big thing, I am 25, i believe I fall in the younger generation. But let me tell you a fact, without political power the younger generation is nothing. Its just big numbers.
    If there was any younger generation ideas in the political scenario, they would do something about global warming. Within a hundred earth’s temperature is gonna rise 4 degrees, India will be worst affected because of its population. What the government is doing about it…. I feel this whole discussion is useless. Let me just clear what I wrote before……
    And where did I disagree, please read my previous reply carefully you would know where I disagree.
    And when you say you are responsible and tax paying citizen so am I.

    • Yes, it’s getting towards a useless discussion. From money topics, now you are talking about global warming, population and politics which unfortunately not the topics for this blog. And by the way, on my blog I write about things that make sense to me and you have the option of not following it.

  20. Way to go Ajith…people like you give us hope that all can still be well with our country.

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