Upcoming changes to PayPal User Agreement for India and why its great! 2

Yes, you heard it right! the upcoming changes in PayPal User Agreement for India are very right and in the positive direction. If PayPal wants to operate in India, it needs to follow Indian banking regulations or it should not function.

So what are the upcoming changes?

  • 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
  • Export-related payments for goods and services into your PayPal account may not exceed US$500 per transaction.

So what does it really mean for freelances?



Well, to be really true, it makes no difference! Yes. If you were legally taking money via PayPal and then sending the money to your bank account via bank transfer or taking the cheque payment then there is nothing to worry about. Under the new guidelines, PayPal needs to transfer all amounts within seven days to your bank account.  Hence, if you were transferring the money to your bank, then the money gets added to your personal income and is taxed as per the tax slab under which you fall.

Some (or many) users were simply keeping the money in their PayPal account and either purchasing stuff or doing nothing. Hence, this income was never getting taxed. Under the new guidelines, all payments would compulsorily come into their bank accounts and hence would be taxed. If you need to make any online purchase, then you can very well use the credit card or any such payment mechanism.

The advantage would be that all freelancers would now have a level playing field. Earlier, many were not disclosing the income and hence no tax. But now with all users being taxed, the rate variations would reduce. Hence, those who were charging low rates due to this would substantially reduce as they would now need to take tax into consideration.

Second, the export related payment for goods really does not have much significance, mainly because as such the money gets transferred to your bank account. The only disadvantage would be for users getting payment exceeding USD 500 or more. Well, if they do receive such huge payments, they could very well get cheque payments directly in to their account.

So if am a Freelancer I cant get money now?

No, that’s really not true. You can get money but as discussed above and as per rules and regulations laid down by Reserve Bank of India. If PayPal wants business from India, it needs to do it as per rules and frameworks laid down by Indian agencies. You can receive money as you are receiving it right now, but you will now not be able to hold in in your PayPal account online. It would need to be transferred to your Indian bank account. This would now be disclosed income and added to your income statement. Tax would apply. This money cannot be stored online from now on, nor can you make online purchases using PayPal.

I still have doubts in my mind

If you still have doubts, please comment and we will try to find a solution to your question.

2 thoughts on “Upcoming changes to PayPal User Agreement for India and why its great!

  1. Pingback: Tweets that mention Upcoming changes to PayPal User Agreement for India and why its great! | Jaagare.com -- Topsy.com

  2. Reply Francie Andre Jan 29,2011 7:03 pm

    Magnificent website, and I want the topic. Anyhow may I sign up to it, I can’t workout how to. Many thanks.

Leave a Reply