Reserve Bank of India is paying close attention on PayPal. Few week back, Indian financial regulator RBI enquired PayPal about their cross-border merchant transactions and due to that PayPal suspended their service of withdrawing funds to Indian local banks. Although PayPal got relief from Indian financial regulator and withdrawn from the suspension and resumed the service again since March 3rd, but imposed new rule for Indian PayPal users. This time onwards whenever you will withdraw money to your Indian bank, you have to select “Purpose Code” of your withdrawal. As per PayPal blog quote:

This information is required under the laws of India in order to identify the nature of cross-border merchant transactions.

So, “Purpose Code” is not at all the only requirement for Indian PayPal users, you have to furnish your PAN number too to update your account information once at the time of your log-in to PayPal.

Attention: PayPal asking PAN Number from Indian users
Update account information with PAN Number

The requirement of Purpose Code and PAN Number will help RBI to close look your online transactions via PayPal. So, this time onwards Indian PayPal users must prioritize their attention on online transaction via PayPal.

Please note that according to Indian law, based on the value of withdrawal and the purpose code in your declaration, your bank may require you to provide documentary proofs such as invoices / goods receipt forms as applicable to reconcile with your withdrawal.