PayPal ‘Almost Dead’ in India with New Restrictions of Reserve Bank of India

by HEMANTH KUMAR on January 30, 2011


PayPal India users, here is a bad news for you. PayPal given a 30-day advanced notice on changes to PayPal user agreement for India with effect from 1 March 2011. Reserve Bank of India sets up new requirements for PayPal services in India. With effect from March 1st, you are not able to keep any money in your online PayPal account and received money must be transferred to your bank account in India with in 7 days. Receiving payments into PayPal account may not exceed US$500.

You are not allowed to use money in your PayPal account to buy goods. As you are not allowed to maintain balance in your PayPal account, If you want to make payments via PayPal, the money should first be transferred to PayPal using your bank’s credit card.

Many PayPal users are blaming PayPal for the restrictions. We should not blame PayPal, PayPal has to comply with RBI guidelines, otherwise RBI will stop PayPal operations in India. On the other side we are not to blame RBI too. As the money coming through PayPal is taxable in India. Most PayPal users may not declaring it or not transferring to their bank account. They are directly using money in PayPal account to pay or buy online. If the user didn’t declare money earned through PayPal on Income Tax returns or didn’t transferred money to bank account, Income tax authorities of India won’t have a clue about your earnings through PayPal. So, RBI might set this guidelines to keep track of the payment activities on PayPal as they are not able to monitor PayPal directly as they do with the banks in India.

You can read the full notice PayPal here and here is a PayPal blog post.

Its just like the previous BalckBerry issue in India. The guidelines are may be acceptable but the US$500 restriction is not fair, they should increase the limitation at least.

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