Reserve Bank of India has been giving hard time to PayPal and its users in India. RBI had previously blocked PayPal transactions in India a few times, and they made it difficult to withdraw payments by enforcing exports and forex related compliance. Here is yet another bad news for Indian PayPal users.

With effect from March 1st, Indian users cannot receive payments of more than $500 in your PayPal account. Moreover, you cannot keep or use any funds in your PayPal account. You can use your PayPal balance to make send money for any goods or services, and must withdraw it to your bank account within 7 days of the receipt.

These changes have rendered PayPal almost useless for small business, webmasters and publishers. Most webmasters and publishers rely on PayPal to receive payments from advertisers and clients. It has also made it impossible to buy anything online with PayPal. Sending payments abroad via other channels is already a pain, sending a bank wire requires too many formalities, documentation and time. Moreover, you are even required to deduct TDS on payments you make for any products or services.

The restrictions will take effect on March 1st, so you have 30 days to complete any pending transactions you may have.

This step by RBI is yet another gimmick by corrupt Indian Government to make life difficult of entrepreneurs, kill innovation, slap more taxes and create more channels to take bribes.

Following is the notification from PayPal about this issue:
As part of our commitment to provide a high level of customer service, we would like to give you a 30-day advance notice on changes to our user agreement for India.

With effect from 1 March 2011, you are required to comply with the requirements set out in the notification of the Reserve Bank of India governing the processing and settlement of export-related receipts facilitated by online payment gateways (“RBI Guidelines”).

In order to comply with the RBI Guidelines, our user agreement in India will be amended for the following services as follows:

1. Any balance in and all future payments into your PayPal account may not be used to buy goods or services and must be transferred to your bank account in India within 7 days from the receipt of confirmation from the buyer in respect of the goods or services; and
2. Export-related payments for goods and services into your PayPal account may not exceed US$500 per transaction.

We seek your understanding as we continue to employ our best efforts to comply with the RBI Guidelines in a timely manner.

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