PayPal enters into settlement with RBI, IEC code becomes compulsory
Recently, RBI had suspended PayPal services in India, because it did not comply with the Payment and Settlement Systems Act, 2007. This Act stipulated that no person other than the RBI can commence or operate a payment system, except with an authorization issued by the RBI and exiting payment systems would cease to have the right to carry on their operations, unless they obtained an authorization within six months from the commencement of the act in August 2008. But PayPal failed to take any action.
Further, RBI had issued a notification (RBI notification no RBI/2009-10/231) on 24 November 2009 under Sec 18 of the said Act, which provided ‘Directions for opening and operation of Accounts and settlement of payments for electronic payment transactions involving intermediaries‘ and was to be complied within 3 months of issue of these directions. Read here.
But after talks between RBI and PayPal, RBI has allowed Paypal to resume bank withdrawals for settlements for exports of goods and services, subject to exporters providing IEC (Import Export Code) at the time of withdrawal. IEC is required under the current foreign exchange laws of India in order to identify the nature of cross-border merchant transactions.
Though personal inward remittances to India through paypal remain suspended, as Paypal admits of not having necessary permissions for the same. The main concern for not allowing the personal remittances is that it can be used as a tool for excaping Income tax and even by terrorist outfits for transfer of illegal funds. Therefore, proper safeguards are required to be followed before the personal remittances are allowed by RBI through PayPal. Though, PayPal intends to issue FIRCs (Foreign Inward Remittance Certificates) to Indian exporters. Read More
Mr Rohit Ahuja, (ACA ACS ACWA LLB B.Com), a Foreign Exchange & Tax Law expert, adds that the above makes it very clear that Paypal can only be used to collect payments in Foreign Exchange from overseas clients and NOT indian clients, the same we have been advising to our clients for long. And as regards the Web portals that are using Paypal as a tool for collecting local payments also, which is not allowed by RBI and can result in 2-3 times penalty of the amount received, according to the Indian laws. For collection of local Payments, it is always advisable to use Indian Payment Gateway like CCavenue, which provides various options of Net Banking, Credit/Debit card, etc.
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2. To get an IEC code, you can get in touch with CyberLawTimes.com team for professional solutions.
The Payment and Settlement Systems Act of 2007 stipulates that no person other than the RBI can commence or operate a payment system, except with an authorization issued by the RBI.
Existing payment systems would cease to have the right to carry on their operations, unless they obtained an authorization within six months from the commencement of the act in August 2008.
I want to know current news of RBI with Personal Account of Paypal India