PayPal India Restrictions

• The PayPal user should not use any funds available or any future payments made into his PayPal account to purchase goods or services overseas and must be moved into his bank account in India within 7 days of the receipt of confirmation by PayPal.
• The maximum amount of payment or remittance (for export of goods and services) through your PayPal account should not exceed US$500 per any transaction.

One may wonder why such strict money transfer regulations were imposed on online money transfer companies such as PayPal. On the one hand, RBI has found out many PayPal account holders shop online with the foreign funds that they earned without transferring it into India or to their bank accounts. On the other hand, RBI thinks many PayPal account holders use this method to evade taxes by declaring lower business turnover. Such tax invasion has grown out of proportion; as such RBI has intervened to curb the menace that affects the Indian economy.

In order to make the PayPal user more aware, the following Questions & Answers were put forward:

Why PayPal has introduced a mandatory US$500 upper limit for any transaction?
This is a RBI ruling on PayPal applicable from March1, 2011. Any PayPal account holder in India cannot receive funds (for any export of goods or services) exceeding US$500 per any transaction. This change is to ensure that we continue to comply with the RBI Guidelines.

Why PayPal India does not keep my balance funds in my PayPal account.
This is also a RBI ruling which states that no funds should be kept in anyone's PayPal account more than 7 days. All funds received to any PayPal account have to be transferred to respective customer's local bank account within receipt of such funds for the export of goods and services. Since PayPal (non-banking, non interest paying entity) does not pay any interest on the balance amount lying against PayPal account holder, PayPal has to transfer the any balance money to account holder's local account. Can any of my customers complete the checkout through their PayPal account balance?
Yes your customers can check out linking their credit cards with their PayPal account, however according to RBI regulations, no customer in India can send money from his account balance with PayPal beginning from March1, 2011. In essence, you or your customer needs to link a credit card to PayPal account before sending or receiving money.

The customers willing to buy goods and services listed on my website are not able to pay through PayPal hereafter?
No they can for a purchase for any goods or service listing not exceeding US$500. This cut off point is sue to RBI ruling which states that any PayPal account holder cannot receive payment for any goods and services exceeding US$500. In the case your listing exceeds US$500 per transaction, and then you have to explore alternative methods of payment other than PayPal.

In consideration of the above facts, any Indian expatriate or a local intends to do online money transfer using his or her PayPal account should be aware of these recent rules and regulations enforced on online money transfer companies such as PayPal. By complying with RBI regulations, anyone can avoid lot of disappointment including delays when moving online export related products and services.