PayPal Team Shocked Indian Freelancers with New Rules

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PayPal Team Shocked Indian Freelancers with New Rules

PayPal team shocked Indian PayPal users by sending them a surprise Email last night. Inpaypal logo the Email PayPal team stated new terms and rules for Indian PayPal users. Here is a preview of Email from PayPal:

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.
  3. Now lets get into detail of whole PayPal fiasco. I hope every one remember last year problem with PayPal, when they stopped personal payment to Indian PayPal users and later on they stopped the option to withdraw money into your bank account.

Update: $10000 limit for Indian PayPal users:

This is a one of the biggest issue for freelancers, developers and affiliate marketers. Now we can’t get payment of more than $10000 at one go. Though we can always ask us client to send money in two transaction which should be lower than $10000 each. But for affiliate payment, this will be a big issue. 

PayPal fund can’t be use to buy goods or services :

This is something which I loved the most about PayPal, that we can use PayPal money directly to buy any thing online. But with this new rule, we can’t use our PayPal balance to buy anything and more over you will have to withdraw your money within  7 days. This particular point is insane, specially people receiving small checks. As if you are withdrawing money below 7000, PayPal will charge INR 50. So imagine if you are getting paid in small amount, with every transaction you will be losing money. And if you will be buying anything using PayPal, you will be using Credit card. And you will lose big chunk of money in currency conversion.

This is not the first time Indian PayPal users are facing such problem but this time these new rules are going to bring restlessness among Indian Freelancers and online marketers.I know we still have 1 month to look for PayPal alternatives, but I hope that PayPal team should try to work closely with RBI (Reserve bank of India) and work out on both the new rules.

People who are blaming RBI (Reserve bank of India) for all PayPal issue should stop doing this. Because the problem is in the TOS of Indian currency rotation rule. According to RBI rules:

  • Any company keeping money for more than  7 days have to pay interest and should be treated like a bank.
  • Any transaction which bring money more than $500 at one go, should be reported to RBI.

So the point is, PayPal wants to run themselves as free entity and not something bound with lots of rules and regulations, which is fair on their part. But by the end of the day, it’s Internet marketer like us which will suffer the most.

I hope in next one month, PayPal and RBI will work together closely to make some changes in above rules and will give peace of mind to Indian freelancers and online marketers.

Do let us know how your business is going to be affected with these new rules and what suggestions would you give to RBI and PayPal to overcome this issue?

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Article by Harsh Agrawal

Harsh has written 1048 articles.

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  1. sreejan says

    Paypal also doesnt allow indians to pay Affiliates.
    Can anyone help me with a payment system through which I can pay affiliates?

  2. vinodh says

    I was misled by last updated time stamp 17/09/2014 .
    I believe there is a limit of $10000 /transaction which is high enough. But the article talks about $500 limit and 2011

  3. meow says

    hi my debit card dsnt wrk with paypal…..can i link my credit card or is credit card too is restricted for indians

    • Prem Pathak says

      paypal not supports debit cards. You can only receive in your bank account but if you need to pay you should have a credit card.

  4. Ravi says

    @Harsh I am a newbie blogger and I used paypal to pay domain and hosting bills what to do now I dnt have a cc so how to pay the bills?

  5. Atul says

    Bhai but right now you can open one account in hdfc bank for rs 20000 [maintain minimum balance ] and they are offering rs 10000 limit credit card to clients .

    Now how much paypal can charge back if limit is only 10k …:P

  6. prateek says

    Very true.. it is very difficult for small businessman or entrepreneur to survive in Indian market.. there is no support from Govt. Very recently i approached a bank for a business loan of 15 Lacs for starting my setup.. guess what.. they said they can give me loan only if my annual turnover is more thn 2 Cr & i need to show them that i have maintained atleast 20L on average in my account.. i dont understand if i would have this much money why will i go for this small loan??

  7. Atul says

    It is justnot a big kick to webmaster and freelancers but also for merchants from India . One of my close friend is worried about this issue because most payment on ebay sold products come from paypal sources and now it will drop down his work .

    Lets say – Any person from USA purchased a product from Indian seller and made payment by paypal . Now if by any chance product take more than 1 week to reach buyer and he is not satisfied with merchant than what he can do …

    Because after 7 days money is transferred to Indian merchant account and paypal is empty and now he has no hope for refund too because merchant paypal is empty :P . No use of paypal charge-backs when accounts are cleared after 1 week .

  8. Malathy Badri says

    I think there is no use in crying and shouting. What we all can do to instill sense into those who are creating laws(loss?).

    How do merchants like sell products or services to Indians without paypal? There is no matching service. All of the leading banks are aware of paypal payment gateway. But, none of them have come out with an alternative. Paypal has no competition from Indian ecommerce.

  9. Sushant says

    Why are both paypal and rbi sucking life out of freelancers. Do they wanna make us give up our freelancing work. We already pay a huge amount of our income in paypal fees and currency conversions. On top of that this is what we get. Rather than helping young generation to a better future, they just want to screw us up.

  10. Timon Weller says

    These rules are ridiculous if you ask me and makes it harder for you people in India to make money online, especially if you are an internet markerter paypal is needed. I guess the best option is if you have family outside the country you can open up a Paypal business account in another country.. Does this apply to Moneybookers as they are similar to Paypal but less restrictions?

    • says

      Lala it’s because of the clash of policies between R.B.I. and PayPal. It has nothing to do with fraud or probably step taken by R.B.I. to fight against those who are not paying taxes for payment received via PayPal.

  11. ram jain says

    dear harsh i have some question

    will i be able to pay godaddy for my domain renewal by my debit card or by alert pay or any thing

    and also to host gator

    is only PayPal got the notice of every one else like alert pay also got notice

    • says

      Ram I’m not sure if it’s only PayPal or other’s aswell. If you have credit card inked to your account, you will be able to make payment for anything using PayPal. Though balance will be directly deducted from your Bank account (Linked card) and not from your available PayPal funds.

  12. ravindra says

    Use your MasterCard, visa , American express debit card to pay your hosting bills to Hostgator . they accept Indian bank issued MasterCard, visa , American express debit card.

  13. Naveed Hussain says

    Even we do not have paypal in our country here in Pakistan, but we do want it to come, however after reading this post, I dont think that PP will ever allow Pakistan to join in, and even if it ever does, there will be similar issues.
    This is totally insane.

  14. Manoj says

    If you cannot buy anything using paypal then what’s the use to link it to credit card. Does they want us to link credit card to them just to find we cannot buy any thing.

    Getting verified to increase withdrawal limit is of no use know.

    Paypal has been degraded to just as an money transfer service in India.

  15. Manoj says

    Yes, that’s the biggest shock of 2011.
    Freelancers, small home business even those ecommerce-shops will get vanish or may acquire different root (which I don’t think is possible).

    I hope each paypal user might be searching for alternative and this will affect paypal indirectly and benefit other such services.

    I am not sure if other alternatives have the same RBI limitations, if so then forget email payments and need to use wire transfer (which is costlier).

    You cannot keep balance and even not buy things which is “jaley par namak cheedakna”.
    If no balance surely you cannot buy anything and nobody wants to link credit card to paypal to buy and it will be good to pay directly via cc (if you have one) instead of paypal.

    If you are verified user and payments are still tracked to your bank then when WHY this.
    We can only hope that RBI & PP will resolve this issue early or Paypal will soon vanish from India.

    Its irony that government says that India is developing as an IT major, but when it come support IT related issues or services they start blocking passages. Our politicians and officials are limited to there thinking, that’s why we are left behind and still counted as developing country. But these politicians have swiss account and CWG officials still moving freely getting vip treatment. Indian politicians and officials will surely take another 100 yrs to get matured. That’s why western countries have so many options, but here we are still stick to DD. No wonder tomorrow there can be an “farman” to block all email(gmail/yahoo) accounts.

    If any one has the alternative for PP please update over it.

  16. NITYIN says

    These are basically RBI rules which Paypal is following now. RBI is the main culprit here rather Paypal as they have to adhere to country’s financial regulations.

  17. Jasmine says

    This is bad for Indian internet marketers. I wonder will you be able to open a bank account in another country and transfer you Paypal money there?

  18. 113tidbits says

    So it’s going to really stink for some of the RBI online marketers that never contribute.

    Luckily, this will cut back on the amount of spammy submissions that have been running rife at the 113Dir.

  19. Sravan says

    I asked a few questions on this blog post

    I dont know why the paypal people deleted it twice even after i reposted it.

    I just had these questions.
    I reside in India and have a virtual team working from the US.
    I usually pay them using PayPal. Now with this new RBI rule, will I be able to pay my team using paypal business account?

    Guys, we need to find out some solution. It is quite sure that all the payment gateways like Paypal will be affected by this new RBI rule very soon.
    What say?

  20. Akhilesh says

    Its really sad that RBI is doing this…..they cant bring back the money in Swiss banks but are spoiling the lives of free suck RBI….
    I will share this post in my blog , giving you credit…..

  21. Sreejesh@Techgyo says

    This is really really shocking for us. Not everyone can get a Credit card, especially freelancers can’t get soon. Paypal was the backbone in the internet business for we bloggers and freelancer developers. This is gona be really hard for us. Until we find a better alternative its a end game for us. RBI is hitting us hard every year. and this is almost like stopping us from doing our job. Why can’t RBI do something for those who invest billions of black money in swiss banks.

  22. Manish says

    RBI has screwed all the 1,70,000 small techie businesses as now you cannot pay any small bills like

    Domain Name Registration
    Web hosting
    Commission or incentives to other partners all over world
    Small software’s or tools you buy
    Small payments you make to run business

    All this would never be possible now

    RBI & Indian Govt does not want black money back they want 1,70,000 companies or individuals to shut or close there business. This will lead to atleast a job loss of 4-5 lac people in India

    This would lead to a estimated loss of 2-3 billion dollars in IT field.

    Shame Indian Govt Shame RBI

    We should all put pressure or else we will have to perish.

  23. Handoko Tantra says

    This is a really bad news because Paypal is the number 1 payment proccessor that most bloggers and marketers used for their online transaction including form Indonesia.

    Well, I hope this issue will be amended ASAP that beneficial to bloggers and IM’s

  24. Kartik@DailyTechPost says

    Hey I was also disturbed when I got this mail from PayPal..And truly it is a bad news for us..I don’t think that PayPal and RBI would look for some solution to this…so it is better that we look out for some alternatives to it.. :(

  25. Rahul says

    Very bad news for small money makers. They have to pay 50 rs for every trans. Also, i don’t understand why any big company take or make any changes in there payment systems. As very less peoples in india are big IM.

  26. Rajan Balana says

    I am very much shocked after hearing this news, I don’t know what all changes will be brought in the online world for indians :(

    • says

      Rajan this will certainly a big issue for Indians, as globally PayPal is most recognized company and many Indian online marketer and worker don’t have credit card and they usually rely on PayPal for receiving and sending money.

  27. Saket Jajodia says

    Sometimes I even get payments like $3 so if I keep start transfinite that small amount so what I will get???

    • says

      Imagine $3 = INR 132
      And when you withdraw this amount in 7 days it would be:
      132-50= 82
      This is the biggest problem with latest rule. Probably PayPal should remove that 7000 Cap and no charge for withdrawal.

      • Nihar says


        You are spot on. Due to all this changes. Paypal should rethink and remove that 7000 CAP.

        What if, the blogger receives a donation of 1$ for the BEER or COFFEE. What happens for then :)

        Ending up with no amount :( in your bank.

  28. Kimberly Castleberry says

    Wow, ouch that’s not cool. That effectively leaves a lot of you guys very hamstrung when it comes to doing business online. Do you have the ability to push the money to a Paypal credit card and work back and forth off of it? That would give you the immediate buying power of the paypal system with an intermediary step. (I’m I guess assuming that Paypal credit cards are available in India which I dont know to be true.)

  29. Tinh says

    That is indeed a bad news to Indian bloggers and it seems that you can not trade via paypal, I hope it will be amended soon.

  30. Pradeep @ HBB says

    Seriously this is the worst thing that can ever happen to all the Indian Freelancers and Bloggers. :(

    Normal bloggers won’t be able to pay their webhosting bills for sure. Wish something happens in our favor soon.

      • Anubhab says

        Quite true. But many of the budding bloggers might not have a credit card, it would be a real hassle to go in hunt for one. However I guess we can use virtual credit cards.

    • Typhoon says

      It is not directly possible but there are two ways of doing this.

      1. Transfer all your funds from paypal to bank account and then back to alertpay. Easy enough? or read the second way.

      2. You can use online services that will do this. All you have to do this is pay them money through paypal and then they will make a payment towards your alertpay account. Sounds interesting? but their is always some business involved in tsuch things. And many such services offering this take some %tage of fee.

      Still, I think paypal will be coming up with new updates soon because these new limitations are really making a big wave online and forcing the authorities to think something better and beneficial.

      The 7 day limitation and then the restriction on purchasing good/services with paypal balance is what pissing me off more.

      I can workaround the $500+ limitation with HostGator because they are the only one program I am with right now that pays that much in bulk through paypal. Rest sends me a direct deposit or cheque or their amount is less than the limit.

      HostGator or someone affiliate program could consider creating a system something like buysellads has in which they can allow affiliates to cashout whenever they want for a particular month commission after they have been approved. I think it will be a great idea, but possible or not is a big question because why would they spend money/time in creating such thing specially? They might simply say that you will have to opt for alternate method which is cheque payment.

      • Typhoon says

        Thought to add a Disclaimer…Beware of the second method I talked for converting paypal money to alertpay because you can* be scammed in that case as I’ve closely been with these people when I was not a blogger and I know there are many such people waiting for you with their website/service.

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