“Mani, I’ve been using PayPal for everything in the US – paying freelancers, splitting bills, online shopping. What happens to my PayPal when I move back to India?”
This comes up in our WhatsApp community all the time.
And the honest answer disappoints most people.
PayPal in India is not the same PayPal you’ve been using abroad. Not even close.
It’s a completely different product with different rules, different limitations, and a very different fee structure. When I moved back in 2017, I learned this the hard way.
PayPal exited the domestic India market in 2021. Today, it only handles cross-border transactions. No domestic payments.
No peer-to-peer transfers. No wallet balance in foreign currency.
But that doesn’t mean it’s useless. Depending on your situation, PayPal can still play a role – both before and after your return.
This guide covers both phases. What to do with your PayPal account before you move.
And how (or whether) to use it after you’re in India.
Part 1: Using PayPal Before Returning to India
If you’re still abroad and planning your move, here’s what you need to handle with PayPal before you leave.
Close Out Your US/UK/Foreign PayPal Account
This is the first thing most NRIs don’t realize.
PayPal accounts are country-specific.
Your US PayPal account is tied to your US address, US bank account, and US residency. You cannot simply “change” it to an Indian account.
When you move to India, you’ll need to:
- Withdraw your full PayPal balance to your US bank account
- Resolve any pending transactions, disputes, or holds
- Close your US PayPal account
- Later, open a new PayPal India account (with your Indian details)
Don’t rush this.
Some people close their US bank account before emptying their PayPal balance. That creates a nightmare – money stuck in PayPal with no bank to withdraw to.
Timeline I recommend to our community:
- 3 months before moving: Start winding down PayPal activity. Complete pending transactions.
- 1 month before moving: Withdraw full balance. Unlink subscriptions tied to PayPal (Netflix, Spotify, etc.).
- 2 weeks before moving: Close the account once balance is zero and all disputes are resolved.
- After arriving in India: Open a new India PayPal account when needed.
For the broader picture of managing your finances before the move, our financial checklist for returning NRIs covers everything.
Using Xoom (PayPal’s Money Transfer Service) to Send Money to India
Here’s where PayPal actually becomes useful for NRIs before moving.
Xoom is PayPal’s international money transfer service.
If you have a US PayPal account, you can use Xoom directly through the PayPal app to send money to India.
It works for NRIs in the US, Canada, UK, and most European countries.
How Xoom works:
| Feature | Details |
|---|---|
| Send methods | PayPal balance, US bank account, credit card, debit card |
| Receive methods in India | Bank deposit, UPI transfer, cash pickup (Muthoot Finance, Manappuram) |
| Speed | Bank deposit: typically a few hours. UPI: near-instant. Cash pickup: minutes. |
| Supported banks | Almost all major Indian banks – HDFC, SBI, ICICI, Axis, PNB, Kotak, Yes Bank, and more |
| UPI support | Yes – just need recipient’s UPI ID |
| Recipient needs PayPal? | No |
Xoom fees and exchange rates:
Xoom sometimes waives the transfer fee – especially for bank-funded transfers. But don’t be fooled. They still make money on the exchange rate markup.
Always compare the total amount received in INR (not just the fee) between Xoom and alternatives like Wise. The exchange rate markup can quietly cost you more than the transfer fee.
When Xoom makes sense:
- Sending money to family in India quickly (especially via UPI)
- Small to medium transfers where convenience matters more than getting the absolute best rate
- If you already have a PayPal account and want everything in one place
When Xoom doesn’t make sense:
- Large transfers (₹5 lakh+) where even a small rate difference costs thousands
- Regular monthly remittances where fees compound over time
For a detailed comparison of money transfer options to India, including Wise alternatives, we have a dedicated guide.
Also check our Xoom vs Remitly comparison for a head-to-head breakdown.
Transferring Your PayPal Balance to India Before Moving
If you have a balance sitting in your US PayPal account, you have a few options:
Option 1: Withdraw to US bank, then wire to India
This is the cleanest path.
Withdraw PayPal balance to your US bank. Then use your bank’s wire transfer or a service like Wise to send it to your NRE or NRO account in India.
You get better exchange rates this way than going through PayPal’s conversion.
Option 2: Use Xoom from your PayPal balance
You can fund a Xoom transfer directly from your PayPal balance. The money reaches India within hours. But the exchange rate markup means you’ll lose approximately 2-4% compared to the mid-market rate.
Option 3: Spend it down
If your balance is small, just use it for online purchases before you leave. Buy things you need for the move.
My recommendation: For any amount above $500, Option 1 is worth the extra step. The exchange rate savings on $5,000+ can be significant – potentially $100-200 in your pocket.
For moving large amounts to India, we have detailed guidance on the most cost-effective methods.
Handling PayPal-Linked Subscriptions
This catches people off guard. If you have subscriptions billed through PayPal, plan ahead.
Common PayPal-linked subscriptions NRIs have:
- Streaming services (Netflix, Spotify, YouTube Premium)
- Software subscriptions (Adobe, Microsoft 365)
- Domain and hosting (GoDaddy, Namecheap)
- Freelancing platforms (Upwork, Fiverr)
- Online storage (Dropbox, iCloud)
What to do:
Before closing your US PayPal, update the billing on these services to either a US credit card you’re keeping, a direct Indian payment method, or the Indian version of the service (many have India pricing, which is cheaper).
If you’re keeping a US bank account after moving to India (many NRIs do), you can link those subscriptions to that bank card instead.
If You’re a Freelancer Getting Paid Through PayPal
This deserves special attention.
Many NRIs who freelance on platforms like Upwork, Fiverr, or Toptal get paid through PayPal. When you move to India, your payment flow needs to change.
Before the move:
- Withdraw all pending earnings to your US bank
- If possible, switch your freelance platform payout to a direct bank transfer (most platforms support this)
- Download all tax documents, e-FIRAs, and transaction records from PayPal
After the move:
You can open a new PayPal India account and continue receiving international payments.
But be aware of the fees (covered in Part 2 below).
Many freelancers in our community have switched to alternatives with lower costs.
Part 2: Using PayPal After Returning to India
Now, the part that surprises most people. PayPal in India is a fundamentally different product.
What PayPal India Can and Cannot Do
Let me be very clear about this.
| Feature | PayPal India (2026) |
|---|---|
| Receive international payments | Yes |
| Send money within India | No |
| Send money abroad from India | No (for personal accounts) |
| Hold foreign currency balance | No – auto-converted to INR |
| Domestic payments (like UPI/Paytm) | No |
| Online shopping on Indian sites | No |
| Online shopping on international sites | Yes (using linked Indian card) |
| Keep money in PayPal wallet | No – auto-withdrawn to bank |
| Peer-to-peer payments in India | No |
The key takeaway: PayPal India is essentially a one-way pipe. International money comes in, gets converted to INR, and gets sent to your linked Indian bank account. That’s it.
It exited domestic payments in 2021.
For day-to-day payments in India, you’ll use UPI, Google Pay, PhonePe, or your bank app. PayPal is irrelevant for domestic transactions.
For understanding digital wallets in India, we have a guide on what works and what doesn’t.
Setting Up a PayPal India Account
If you need a PayPal India account (say, for receiving freelance payments), here’s how.
What you need:
- Indian mobile number
- PAN card
- Indian bank account (savings, NRO, or current account)
- Aadhaar (for full KYC verification)
- Valid email address
Step-by-step:
- Go to paypal.com/in and click “Sign Up”
- Choose “Individual” (for freelancers) or “Business” (for companies)
- Enter your Indian mobile number and email
- Complete KYC – link your PAN card
- Link your Indian bank account (this is where PayPal will auto-deposit your funds)
- Verify your bank account (PayPal sends two small deposits; confirm the amounts)
Important: The name on your PayPal account, PAN card, and bank account must match exactly. Even a middle name mismatch can cause verification failures or withdrawal delays. This trips up a lot of people in our community.
If you don’t have a PAN card or Aadhaar yet, get those sorted first. PayPal India requires full KYC compliance under RBI regulations.
PayPal India Fees – The Real Cost
This is where it hurts. PayPal India is expensive for receiving international payments. Let me break down every fee layer.
Fee Layer 1: Transaction Fee
4.4% of the payment amount + a small fixed fee (approximately $0.30 for USD payments).
Fee Layer 2: Currency Conversion Markup
PayPal sets its own exchange rate, which includes a markup of approximately 3-4% above the mid-market rate.
You cannot avoid this – Indian regulations require all foreign currency to be auto-converted to INR.
Fee Layer 3: GST on Fees
18% GST is applied on the transaction fee (not on the full amount, but on the fee itself).
What this actually looks like:
Let me walk through a real example. You receive $2,000 from a US client.
| Fee Component | Calculation | Amount Lost |
|---|---|---|
| Transaction fee | 4.4% of $2,000 | $88.00 |
| Fixed fee | Per transaction | $0.30 |
| GST on fees (18%) | 18% of $88.30 | $15.89 |
| Subtotal after fees | $1,895.81 | |
| Currency conversion markup (~3-4%) | Mid-market rate ₹86 vs PayPal rate ~₹82.5 | ~₹6,635 lost |
| You receive approximately | ₹156,500 | |
| You should have received (at mid-market) | $2,000 x ₹86 | ₹172,000 |
| Total cost | ~₹15,500 (about 9%) |
That’s roughly 8-9% of your payment gone in fees and conversion markup. On a $2,000 payment, you lose about ₹15,000-16,000.
For regular freelancers receiving $5,000-10,000 per month, this adds up to ₹75,000-₹1,80,000 per year in fees.
This is the single biggest complaint about PayPal India in our community.
The headline fee of 4.4% is bad enough.
But the hidden conversion markup roughly doubles the effective cost.
PayPal India for Freelancers – Is It Worth It?
Let me be honest. For many freelancers in our community who’ve moved back to India, PayPal has become a grudge tool – they use it because some clients only pay through PayPal, not because they want to.
When PayPal India still makes sense:
- Your client only pays via PayPal (no alternative offered)
- Small, occasional payments where convenience outweighs cost
- You need the buyer/seller protection that PayPal offers
- You’re on a platform (Upwork, Fiverr) that uses PayPal as a payout option
- You need the global trust factor – some clients trust PayPal more than wire transfers
When PayPal India doesn’t make sense:
- Regular, recurring payments from established clients
- Large invoices ($3,000+) where the fee cost becomes significant
- When your client is willing to use a cheaper alternative
- When you’re trying to maximize your take-home income
Real talk from our community: Several freelancers have shared that they switched their regular clients from PayPal to Wise or direct bank wire transfers and saved ₹50,000-₹1,00,000+ per year.
The conversation with the client is usually easier than you’d expect – most clients don’t care how they pay you, as long as it’s simple.
Compliance and Tax Requirements
This is critical. Every rupee you receive through PayPal India is tracked and has compliance implications.
e-FIRA (Electronic Foreign Inward Remittance Advice):
PayPal generates an e-FIRA for every international payment you receive. This document certifies the inward foreign remittance and includes the payment amount, exchange rate, date, and purpose code.
You need this for tax filing and audit purposes. Download and save every e-FIRA from your PayPal account.
Purpose Code:
Every international payment to India must have a purpose code (as per RBI regulations). PayPal assigns one, but make sure it’s correct for your type of work. For freelance services, it’s typically “P0802” (Computer services) or similar.
Income Tax:
All PayPal income is taxable in India. You must report it in your ITR (Income Tax Return). If you’re registered under GST, international service payments may qualify as “export of services” with a zero GST rate – but you need to file properly.
For a complete understanding of tax filing requirements for NRIs, including freelance income, check our guide.
PayPal India for International Shopping
Here’s one area where PayPal still works reasonably well in India.
If you shop on international websites (Amazon US, eBay, Etsy, international SaaS tools), you can use your PayPal India account linked to an Indian debit or credit card.
How it works:
- Add your Indian Visa/Mastercard debit or credit card to PayPal India
- When shopping on an international site, choose PayPal at checkout
- PayPal charges your Indian card in the foreign currency
- Currency conversion happens either through PayPal (with their markup) or through your bank (check which is cheaper)
Pro tip: Many Indian international credit cards offer better forex rates (1.5-3.5% markup) than PayPal’s conversion (3-4%).
When shopping, choose to pay in the original currency (say USD) and let your Indian card handle the conversion, rather than letting PayPal convert it to INR first.
Note on TCS: Under Indian rules, TCS (Tax Collected at Source) on foreign remittances may apply to international spending above certain thresholds. Keep this in mind for large purchases.
Why You Can’t Use Your US PayPal After Moving
Some NRIs try to keep their US PayPal account active after moving to India. This is a bad idea for several reasons.
It violates PayPal’s terms.
Your account must match your country of residence. Using a US PayPal from India can trigger account limitation or permanent suspension.
Tax complications.
Receiving payments into a US PayPal while being an Indian tax resident creates messy cross-border tax situations. Income received in the US but earned as an Indian resident still needs to be reported in India.
Bank account issues.
If you’ve closed your US bank account (or it becomes inactive), you can’t withdraw from US PayPal. Money gets stuck.
The right approach: Close the US account cleanly. Open an India account if needed. Keep it above board.
Better Alternatives to PayPal for NRIs
Based on years of community feedback, here are the alternatives our members actually use and recommend.
For Receiving International Payments (Freelancers/Business)
| Service | Transaction Fee | FX Markup | Auto-Conversion to INR? | e-FIRA? | Best For |
|---|---|---|---|---|---|
| PayPal India | 4.4% + fixed | 3-4% | Yes (mandatory) | Yes (auto) | Clients who only use PayPal |
| Wise Business | 0.2-1.5% | Mid-market rate (0%) | Yes | Yes (at $2.50 each) | Cost-conscious freelancers |
| Payoneer | 0-3% | 2-3% | Yes | Yes | Marketplace sellers (Amazon, Upwork) |
| Direct Bank Wire (SWIFT) | Fixed fee ($15-40) | Bank’s rate (1-2%) | Yes | Yes (via bank) | Large invoices ($5,000+) |
| Skydo / Xflow / Infinity | Flat fee (low) | Near mid-market | Yes | Yes | India-based freelancers, newer but competitive |
Our community’s top picks:
For most freelancers receiving regular international payments, Wise Business offers the best combination of low fees, mid-market rates, and compliance documentation.
For marketplace sellers and platform-based freelancers, Payoneer works well because platforms like Upwork and Amazon integrate directly with it.
For large, infrequent payments from established clients, direct bank wire (SWIFT) is often the cheapest option.
For a deeper comparison of alternatives, check our Wise alternatives guide and Remitly vs Wise comparison.
For Sending Money Abroad from India (Post-Return)
Once you’re in India, you might need to send money abroad – for family, investments, education, or subscriptions.
PayPal India does not support outward remittances for personal accounts. Here are your alternatives:
| Purpose | Best Option | Notes |
|---|---|---|
| Family support abroad | Wise, bank wire transfer | Wise offers mid-market rates |
| US student loan payments | Bank wire, Wise | Check if your loan servicer accepts international wire |
| Foreign subscriptions | International credit card | Forex markup 1.5-3.5%, simpler than wire |
| International investments | Bank LRS (Liberalised Remittance Scheme) | Up to $250,000 per financial year |
| SaaS tools / business payments | Wise Business, bank wire | Get proper forex documentation |
For detailed guidance on sending money from India to the USA or other countries, we have specific guides.
The PayPal Transition Checklist for Returning NRIs
Here’s a practical checklist to manage your PayPal transition, organized by timeline.
3 Months Before Move
- [ ] Check your PayPal balance and pending transactions
- [ ] Start withdrawing balance to your US/foreign bank account
- [ ] List all subscriptions billed through PayPal
- [ ] Begin switching subscriptions to other payment methods
- [ ] Download all transaction history and e-FIRAs (for tax records)
- [ ] Resolve any open disputes or buyer/seller claims
1 Month Before Move
- [ ] Ensure PayPal balance is zero
- [ ] Unlink your US bank account and cards
- [ ] Inform any clients who pay via PayPal about your upcoming move
- [ ] Set up alternative payment methods for ongoing client relationships
- [ ] Save all tax-related documents from PayPal
At the Time of Move
- [ ] Close your US/foreign PayPal account
- [ ] Keep confirmation of account closure for records
After Arriving in India (When Needed)
- [ ] Get PAN card and Aadhaar card sorted (if not already done)
- [ ] Open Indian bank account (if not already done)
- [ ] Open PayPal India account at paypal.com/in
- [ ] Complete KYC verification (PAN + bank + Aadhaar)
- [ ] Link Indian bank account for auto-withdrawal
- [ ] Set correct purpose code for the type of payments you receive
- [ ] Inform clients of your new PayPal India email/details
Frequently Asked Questions
Can I keep my US PayPal account and just use it from India?
Technically you can log in, but it violates PayPal’s terms. Your account is tied to your country of residence. If PayPal detects you’re operating a US account from India, they can limit or permanently suspend it. It’s not worth the risk.
Can I transfer my US PayPal account to India?
No. PayPal accounts are country-specific. You must close the US account and open a new India account. There’s no transfer or migration process.
How long does PayPal India take to deposit to my bank?
Typically 24-72 hours. New accounts or large/unusual transactions may take longer as PayPal’s compliance team reviews them. Some members in our community have experienced holds of 7-14 days on first-time large receipts.
Can I hold USD in my PayPal India account?
No. RBI regulations require all foreign currency to be auto-converted to INR. PayPal converts and deposits to your linked bank account automatically – usually within 24 hours.
Which Indian bank account should I link to PayPal?
Most members link a regular resident savings account. You can also link an NRO account. The important thing is that the account holder name matches your PayPal and PAN name exactly.
Is there a limit on how much I can receive through PayPal India?
There’s no official per-transaction limit, but large amounts may trigger additional verification. Business accounts handle higher volumes better. For very large amounts ($50,000+), consider direct bank wire instead.
Can I use PayPal India for domestic payments?
No. PayPal exited the domestic India market in 2021. For payments within India, use UPI, Google Pay, PhonePe, or bank transfers.
What about the 1% remittance tax from the US (2026)?
The One Big Beautiful Bill Act introduced a 1% tax on certain remittance transfers from the US starting January 2026. However, Xoom (PayPal’s remittance service) has stated that it doesn’t accept the affected payment methods. Digital payment services like Xoom and Wise are generally not impacted by this cash-focused tax.
Is PayPal safe to use in India?
Yes, PayPal is regulated by the RBI and uses encryption and fraud monitoring. The safety isn’t the issue – the cost is. PayPal is secure but expensive compared to alternatives.
My Honest Take
PayPal was a game-changer when it launched globally. And it still carries enormous brand trust.
But for NRIs returning to India, it’s become a legacy tool – something you use because you have to, not because it’s the best option.
The fees are too high. The conversion markup is hidden and painful. The India product is severely limited compared to what you’re used to abroad. And the alternatives have gotten much better.
Here’s what I tell everyone in our community:
Before your move: Use PayPal/Xoom if it’s convenient for sending money to India. But for large transfers, compare with Wise or your bank. Close your foreign PayPal account cleanly before you move. Don’t leave money stuck.
After your move: Open a PayPal India account only if you need to receive international payments. For everything else – domestic payments, sending money abroad, online shopping – there are better, cheaper options.
If you’re a freelancer: Seriously explore alternatives. The 8-9% effective cost of PayPal India can be reduced to 1-2% with the right alternative. On a freelance income of $50,000/year, that’s a savings of ₹2.5-3 lakh annually. That’s not pocket change.
PayPal isn’t bad. It’s just not built for India anymore. And the sooner you adapt to that reality, the more money stays in your pocket.
Have questions about managing your money during the move back? Join our WhatsApp community at https://backtoindia.com/groups – 20,000+ NRIs helping each other with real, lived experience. Freelancers, business owners, and families all sharing what actually works. It’s free and volunteer-run.
Disclaimer: Fees and features mentioned are based on publicly available information as of early 2026 and may change. Always verify current fees on PayPal’s official website (paypal.com/in) before making decisions. This article is for informational purposes only and does not constitute financial advice. Consider consulting a financial advisor for your specific situation.
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