Paypal India account holders can now withdraw money to Indian banks. When you try to withdraw money to a bank account, it ask to declare a purpose for the proceeds received through PayPal. This is a great move as the online income earners need to comply to government rules and regulations while making money.

The purpose of withdrawal of money needs to be declared only when you withdraw funds. The following are the available options now and they have a description of the same.

In addition, each PayPal India account holder needs to provide the following information to keep your PayPal account active:

1. Your Mobile phone number
2. Your PAN Number

At the moment you can skip this screen but they can made it mandatory at any time. The mobile number will be used for clarification by banks as how the money was earned and the Income Tax PAN (Personal Account Number) id will be used to track your income records and financial transactions.

If you don’t have a PAN card you can apply for a PAN card online and it costs Rs 94 at present. You need an ID proof and address proof to get a PAN card.

Online payment service provider PayPal said that it has suspended certain types of payment transaction in India. When I logged in to my paypal account I found that there is no option to send personal payments.

In a blog posted on its website, PayPal spokesperson Anuj Nayar wrote “personal payments to and from India and transfers to local banks in India have been suspended while we work with our business partners and other stakeholders to address questions they have about the service”.

Without giving any further details for the unusual suspension, he added that the company is working to resolve the situation as quickly as possible.

During this time, customers can still make commercial payments to India but merchants cannot withdraw funds in rupees to local Indian banks, he said.

And here is what Paypal has to say:

Your payment of xxx has been sent back to the sender of the payment. We reversed this payment because we have stopped allowing personal payments to be sent to or from India.

If this payment was a personal payment such as a gift, then we have requested that the sender find another payment method until we restore personal payments to and from India.

The move is reportedly related to the Indian government’s crackdown in November 2009 on international banking transactions, when it instituted new reporting and verification requirements on all banks and financial institutions to prevent international money laundering.