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I am a Indian national and currently an NRI in another country.

I have created a paypal account, added my PAN details and put in the details of my NRE account. But the transfer did not happen and I was backcharged for the same.

I called up ICICI and they say that they do not have any record for refusal of any paypal transaction in my account.

So my question is am I allowed to transfer into NRE account from paypal?

I do not want to transfer to an NRO account since the money credited into it will become taxable.

Regards

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am I allowed to transfer into NRE account from paypal?

Credits into NRE accounts are restricted. It has to be established that the funds being credited are income outside of India.

In case of paypal, paypal uses local clearing to credit funds into Bank Accounts. So essentially one cannot credit NRE account by domestic clearing network like NEFT.

It is best that you withdraw the funds into Bank Account outside India and use SWIFT or remittance service to credit your NRE account.

I do not want to transfer to an NRO account since the money credited into it will become taxable.

This is not the right assumption. Credits into NRO are not taxable by default; if you establish that the funds are from outside India, there is no tax on the income money transferred from abroad into the NRO account. However, the interest that will be paid by the bank on the balance of the NRO account is taxable income in India and is subject to TDS. In contrast, interest paid on the balance in an NRE account is not taxable in India and is not subject to TDS as long as you maintain NRI status.

However it does make sense to keep accounts segregated, i.e. income generated in India, credit the NRO account and income generated outside India credit to NRE.

  • I have clarified the meaning of the second sentence in the next-to-last paragraph. Please roll back if what I have added is incorrect or if you disagree with the changes. – Dilip Sarwate Jun 1 '16 at 13:31
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First of all, you need to tell Paypal people that you've changed your country of residence & your tax residency no longer is India. Then they'll tell you to create a new paypal account & get it verified. And then you can transfer the older paypal account money to that new paypal account & tell them to close the older paypal account. Then use remittance services to transfer to NRE.

That's the legal process as far as I know, because Paypal would want to keep its records updated, or else it'd be against its Anti Money Laundering policy.

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