Today is the D-day for Paypal in India. Well almost.
Unless you are a non-serious freelancer, you won’t bother. But if you are a serious one – you need to take note of today [by the way, we are surprised that Paypal hasn’t cared to share the update about this deadline on the company blog or via any other communication medium].
From March 1st, you won’t be able to receive more than $500 in your Paypal account and worst is that you cannot keep money in Paypal balance for more than 7 days.
“ PayPal will not allow users in India to receive more than US$500.
Starting 1 March, 2011, PayPal customers in India will not be allowed to receive payments for any export-related goods or services for an amount exceeding US$500 per transaction. This change is to ensure that we continue to comply with the RBI Guidelines.
PayPal will not allow Indian users to keep money in PayPal balance.
Starting 1 March, 2011, PayPal customers in India will not be able to keep money in their PayPal account balance. Instead, all money received into a PayPal account must be transferred to a customer’s India bank account within 7 days from the receipt of confirmation from the buyer in respect of the good or services. This change is to ensure that we continue to comply with the RBI Guidelines.”
While RBI suggests that Paypal has violated FEMA, the situation hasn’t improved for Indian freelancers who depend solely on sites like oDesk/RAC/foreign clients for a universally accepted payment service.
“It was observed that a few OPGSPs (Online Payment Gateway Service Providers ) have not only facilitated conclusion of the transactions but also allowed exporters to retain the export proceeds abroad without repatriation resulting in violation of the provisions of FEMA, 1999. Acknowledging however the importance of the services provided by the OPGSPs to the exporters, particularly in facilitating small value export transactions, it has been considered necessary to issue a set of guidelines to cover such e-commerce arrangements.” Paypal RBI Issue–Paypal Violated FEMA Act [RBI Circular]
S Mohan Ramkumar, a freelancer shares his view on the entire Paypal standoff:
I intended to open this article with a quotable quote, but then the ridiculousness of this RBI witch hunt speaks for itself. PayPal and RBI have been engaging in this drama every few months for a couple of years now. It me took me a year of hard work to build a writing business and all my income comes from abroad. Meaningless charades like this may help RBI look busy but puts undue pressure on freelancers and outsourcing companies.
Businesses can hedge the risks of a fluctuating dollar, but cannot hedge the rick of stupid decisions made my bureaucrats earning a steady paycheck every month, thanks to the taxes I pay. I could just give up and go back to a 9 to 5 job, no big deal. But a dream to be independent and have a brand on my own will get slaughtered in that process.
The recent announcement restriction transaction limits among other things is not PayPal’s fault (for once). RBI babus engage in on again and off again efforts to prevent illegal monies from coming in & going out of the country. They have put to use their infinite wisdom and added a bottleneck just because there wasn’t one in the first place!
What good do they think the cap on payments ($500 per transaction) is going to do? Stop terrorists from getting foreign funds? To prevent people from sending black money aboard, wash it and receive it back in white? That’s hogwash. The recent printer cartridge bombs stopped by US authorities took less than $150 to make. So there goes the first stupid argument.
Coming to putting a stop to the Hawala transactions, there already is a withdrawal cap of $ 2500 per month for PayPal accounts. Do you know of any black money dealing crook trying to sneak one lakh a month at a time? Heck now that we are a super power and all, haven’t we upgraded ourselves to scams that are one lakh and 2 lakh crore is size?
OK. For the sake of argument, let us assume that RBI’s decisions were backed by a mountain of evidence. What should a responsible arm of the Government should have done before, or atleast after choking the livelihood of thousands of freelancers? Shouldn’t they have suggested or created alternate and legitimate ways for freelancers & small businesses to bring in money from abroad? Is there an official release indicating if and when the restrictions will come off? Is there a warning indicating which services will be hit next? No. A big fat hairy no!
Online Wallets are not permitted in India. Good, we agree to obey the law of the land. But isn’t PayPal operating for about a decade now and RBI for several? Where they waiting for an
opportune moment until a huge number of self motivated individuals found a new way to earn money legitimately?
What About the Pro-RBI Argument?
That freelancers do not pay taxes? Well, S Mohan Ramkumar has a mega question :
Even if someone tried to do just that, it’s impossible because for about a year now, you will have to mandatorily submit PAN card information to PayPal. Without that, the account cannot be operated. I would say this theory of these bloggers are as preposterous as that of old school journalists rejecting bloggers as uninformed and clueless.
Well, I pray that the $500 cap goes away soon and have asked my client to send multiple payments that does not exceed the limit. Again, am not sure if this loop hole will last or not. I have postponed plans to hire a couple developers to expand the business until things become a clearer. Good to see RBI is doing its part in creating new jobs!
In the meantime, I have created a Moneybookers account and have cleared with them that RBI restrictions won’t apply to them as long as my account is verified. Moneybookers use a different method (SWIFT) to transfer funds and might actually be alright. And am keeping my fingers crossed.
Now that RBI has successfully tackled freelancers, the existential threat to our economy, it is only reasonable to expect them to address lesser issues like money laundering and inflation. I have so much faith in them!
What’s your take? Are you looking at Paypal alternatives in India?
Also see: You cannot send a link to RBI website, without a written permission