PayPal, which is widely known to be an easy way to collect money from affiliate and advertising programs and payment for freelance services, has announced the resumption of its operations on Thursday (March 3, 2010).

Sometime during early February, PayPal had officially announced that the RBI (Reserve Bank Of India) had intimated them that they required specific approvals to allow personal inward remittances to India, which PayPal did not have. So till the time PayPal obtained these approvals; all personal payments into India remained suspended. But now, it appears that PayPal is resuming their services, but with some new features.

According to the new rules specified by RBI (Reserve Bank of India), the PayPal management has included a new field called the “Purpose Code”. Basically, this code allows the banks to identify the nature of the cross border bank transaction. It is also to be noted that this is clearly different from earlier announced IEC (Importer Exporter Code). The new withdrawals will require users to use a Purpose Code while withdrawing money to their bank accounts. So, if you received payments for your website or blog, you need to use Freelance Journalism as your purpose code.

Besides, you don’t have to make any real efforts to get a Purpose Code. PayPal has provided a table in their post to confirm your Purpose Code. You can either choose your code according to your business category or confirm your code from PayPal’s customer support team.

After logging into your PayPal Account and selecting the ‘Withdraw Funds’ option, you would be then asked to fill out a new field titled the Purpose Code.  Select the code most appropriate for your nature of business and proceed.  More details on purpose codes can be found by clicking here. More details on purpose codes are available here.

The users are advised to choose their purpose code accordingly, so that you do not get into any trouble later. PayPal has also not explicitly stated how much the upper limit would be before the Indian user would require additional documents. However, it is believed that this would more likely be not more than Indian Rupees 50,000, as bank deposits above this limit require users to produce their PAN cards.

In addition, it should be noted that based on the value of withdrawal and the purpose code in your declaration, your bank may require you to provide documentary proofs such as invoices / goods receipt forms as applicable to reconcile with your withdrawal.