You are based in India and get paid via PayPal for your services. The money gets deposited in your online PayPal account.
You can use that money in three Different ways –
- You can either transfer it to your local bank account in India.
- You can do some online shopping with that money.
- It accumulates in your PayPal account.
In India the money you getting by PayPal is Often taxable and unless you self-declare it or transfer it to the bank. The India tax authorities won’t have a clue about your online money in you PayPal Account.
It is possible that a large number of PayPal users in India weren’t reporting their PayPal earning in their tax returns. This may have prompted the Government/RBI to enforce the rules that money should be transferred in Indian bank account as soon as it comes to your PayPal account.
RBI don’t have freedom to closely monitor the operations of PayPal in India. PayPal works more or less like an online bank - you can deposit money, you can withdraw money and can make payments. These operation is not monitors by RBI due to restricted freedom. That could have been another reason for the “shut down” Paypal in India.