There’s some good news for the thousands of bloggers, freelance writers, programmers, SEOs, web designers, etc. who rely on the PayPal service in India for receiving payments from their foreign clients.

The good news is that you can now withdraw money from PayPal to your local bank account without requiring an IEC code.

The PayPal blog incorrectly mentioned “Export Code” in their previous blog post though they actually meant “Purpose Codes.” Unlike IEC codes that are unique for every individual / business, Purpose Codes are pre-defined by the RBI and their value varies depending on the type of service that you are offering to the client.

Which Purpose Code Should You Use

Following is a list of select Purpose Codes that are most relevant for us though the full list is available on the website of Reserve Bank of India.

P0805 For freelance journalists and bloggers
P1007 Logo Design, Brand Consulting, Marketing
P0802 Software programmers, freelance coders

The code “P0805″ has been fixed by RBI for “News agency services” and all freelance writers and bloggers, according to PayPal, will come in that category. The code “P1007″ is reserved for Advertising and Marketing so SEOs, SEMs, Social Media Consultants, Web Designers and even Internet Marketers should use this code.

The problem is that you’ll have to specify a Purpose Code each time you initiate a money withdrawal request from PayPal and your bank, as per Indian law, may require you to provide related documentary proofs to reconcile with your withdrawal.

As a blogger, you may receive revenue from both advertising companies (for putting ads on the blog) as well as for freelance assignments (you write for another blog). Same holds true for independent software developers who may also have a blog. Some of the money in your PayPal account could be from writing software code while the other half could be advertising revenue generated from the blog.

Am not sure if PayPal will allow users to specify multiple Purpose Codes at the time of withdrawal but if they don’t do it, you need to be a bit careful because the same Purpose Code may not be applicable for all withdrawal requests.

You can no longer use PayPal as a money remittance service (for example, you are in US and transfer a certain amount of money from your PayPal account to your father’s PayPal account who then transfers it to his local bank account in India). If you have made such “personal payments” in the past, the recipient can only withdraw that money by requesting a cheque from PayPal.