According to the latest update from Paypal, from March 3rd, Indian entities will have only to fill out a ‘Purpose Code’ which defines the purpose of the payment made to them. It appears that the RBI will still not know who is making the payment, only get an indication of the purpose of the payment from the receiver under the laws of India in order to identify the nature of cross-border merchant transactions. What is not clear, and we’ve requested Paypal for info on this, is whether businesses will not require an Importer Exporter Code (IEC), which they had mentioned earlier.

So you can go ahead and pay the Indian mafia extortion money under Purpose Code “P1006” (management services), and nobody will ever know? Perhaps not: Paypal does say 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.” Technoholik rightly points out that “the onus of verifying whether the services rendered fall into the categories listed, falls back on the financial/government agency that choses to investigate someone whose bank accounts are showing suspicious amounts of foreign money coming in via PayPal.”

Paypal expects the full amount of the original withdrawals to be restored in the accounts by the end of the week.

For personal payments, though, transfers are still not kosher. Users will have to complete their withdrawals by cheque.

Purpose Codes:

Code Category Description Who should be using it
P0101 / P0104 Export of Goods Value of export bills negotiated / purchased/discounted etc. (covered under GR/PP/SOFTEX/EC copy of shipping bills etc.) eBay merchants, jewelers, sellers of collectibles and other such products through eBay and your own websites / catalogues globally.

Please note: Cross border shipment of goods and services for which you file GR / PP / SOFTEX / EC forms only should be processed with this code. Use P101 if Deutsche Bank is your banker and P0104 if you bank with any other bank

If you have any questions, please check with your bank to help you with the same.

P0301 Travel , Hospitality and Tours Purchases towards travel (Includes purchases of foreign TCs, currency notes etc over the counter, by hotels, hospitals, Emporiums, Educational institutions etc. as well as amount received by TT/SWIFT transfers or debit to Non-Resident account). Online Travel Agents, Airlines, Railways, Buses, Taxicab Services, Hotels, B&Bs and other travel / tourism related sales through PayPal



Information Technology Computer Information Services. Hardware / Software / Data Processing consultancy/implementation If you are an independent / freelance coder / hardware consultant or data processing service provider, or a small business providing such services for websites globally, please use these codes.

For all IT related consulting services where you know you do not need to file a SOFTEX form, please use the appropriate code. 801 for hardware consulting, 802 for software consulting and 803 for data management and processing consulting services



Content and Journalism News Agency and Subscription services If you are a freelance journalist / blogger / news aggregator please use this purpose code for withdrawals.

If you are a newspaper or an online news aggregator for websites overseas, please use the appropriate code from these two. 805 if you a freelance journalist, and 806 if you are a newspaper / aggregator

P0902 Licensing of creative works Receipts for use, through licensing arrangements, of produced originals or prototypes (such as manuscripts and films) Artists, designers, other creative service providers where the principal revenue mode is license fees, please use this code.

If you produce creative works which you license out for entities overseas, licensing revenues may be classified under this purpose code

P1004 Other services Legal Services If you are providing outsourced law related services
P1005 Accounting, auditing, book keeping and tax consulting services For accounting consulting and accounting services
P1006 Business and management consultancy and public relations services Management / brand consulting and management services can be exported with this purpose code
P1007 Advertising, trade fair, market research and public opinion polling services Marketing/ brand consulting / logo design / event management services can be exported with this purpose code
P1008 Research & Development services If you are an outsourced research and development services provider based in India, receipts can be inwarded through this purpose code
P1009 Architectural, engineering and other technical services Any other technical services such as eTutoring, education and other services you render over the internet via web conferencing tools or similar channels, please use this code for your withdrawals


— Updated: eBay’s PayPal Disallows P2P Payments, Transfers To Local Banks
PayPal To Resume India Payments By 3rd March; Export Code Needed