What Is The KYC Procedure?

Mar 31 2020 | PayPal editorial staff

What to know about KYC to start receiving payments in India.
The KYC (Know Your Customer) Procedure is a standard process to verify your identity and that of your business. This is to help protect your business from risks such as identity theft, money laundering and financial fraud.

After signing up for your PayPal Business Account, you’re invited to complete a KYC Procedure as 1 of the 4 steps to activate your account. Once that’s done, you can start receiving payments locally and internationally.

Here’s a complete breakdown on the details of the KYC procedure for every type of business selling either internationally – or both internationally and locally. As the requirements vary according to the business type, please ensure that you have all the relevant documents; and it should take you no more than 15 minutes to complete the process.
 

Receiving Only International Payments


You’ll need to verify your identity with these 4 steps in order to start receiving international payments:
 
  1. First, verify your PAN by providing a valid PAN Number that bears the same name as your PayPal account.
  2. Secondly, confirm your email address, as doing so will allow you to start receiving payments.
  3. Thereafter, add a local bank account – this will help facilitate overseas payment and withdrawals.
  4. Select a Purpose Code
    Make sure that you select the purpose code that appropriately describes your business transactions. This is required under Indian regulations.

Complete KYC for international process
 

Receiving Local and International Payments

Before you continue, kindly ensure that you are referring to the relevant section that matches your business type as the steps and requirements vary throughout. For your convenience, we have grouped them into the following two sets:
 

  1. Individual Businesses, Freelancers & Sole Proprietors
  2. All Other Business Types (Partnerships, Ltd Company, Corporation & Government)
 

Individual Businesses, Freelancers & Sole Proprietors



Firstly, you’ll need to provide a proof of identity by uploading a copy of your personal PAN card.





You’ll also need to provide proof of your identity and residential address with a copy of an official document from the list.

Are you a Sole Proprietor? Kindly ensure that you fill out the next 2 sections shown below:



If you are a Sole Proprietor, you will need to submit a copy of either a registered partnership deed, income tax, service tax, sales tax or VAT registration, Shops and Establishments certificate, trade license or registration certification as proof of your business entity. After that, you have to submit either a copy of recent bills or bank statements as proof of your business address. View Other Applicable Documents



Next, you’ll need to enter a relevant Purpose Code that accurately describes the type of business you do. This is required as per Indian regulations.



Lastly, you’ll have to provide your bank account information with either a void cheque or copy of bank statements addressed to the same account name as the one in your PayPal account.


All Other Business Types (Partnerships, Ltd Company, Corporation & Government)



Firstly, you’ll need to provide a proof of identity by uploading a copy of your personal PAN card.


You’ll also need to provide proof of your identity and residential address with either your driving license, Aadhaar card, Government Service Tax certificate, a valid passport or a voter identity card. View Other Applicable Documents


Another thing you will need is a Letter of Authorisation to acknowledge that the PayPal Account Holder is authorised to act on behalf of the company.

Next up, you need to provide a copy of your Business Pan Card as proof of identity of your business.


Then, you’ll need to submit a copy of either a registered partnership deed, income tax, service tax, sales tax or VAT registration, Shops and Establishments certificate, trade license or registration certification as proof of your business entity.View Other Applicable Documents


After that, you have to submit either a copy of recent bills or bank statements as proof of your business address.


Next, you’ll need to enter a relevant Purpose Code that accurately describes the type of business you do. This is required as per Indian regulations.


Lastly, you’ll have to provide your bank account information with either a void cheque or copy of bank statements addressed to the same account name as the one in your PayPal account.

And that’s it! You’re done with the KYC Procedure. We’ll usually verify your documents within 24 hours and once that’s done, you’re ready to receive payments.

Ready to complete your KYC Procedure?

Complete KYC for International Payments
Complete KYC for Local & International Payments

 
The contents of this site are provided for informational purposes only. You should always obtain independent, professional accounting, financial, and legal advice before making any business decision.

Frequently asked questions.

To find the best way you can receive payments through PayPal, check out all the payment solutions we offer in India.

For your account security and compliance with India’s financial regulations, you’ll need to confirm your email address and your identity before you can receive PayPal payments and withdraw money from your PayPal account.  

Here are the actions you need to take: 

1. Confirm your email ID registered with PayPal

2. Complete the identity confirmation required for your business type

Find out the documents you should provide according to your business needs, and then click Complete your KYC to begin the identity confirmation. Our comprehensive step-by-step guides can guide you through this process.

  • To receive only international payments, you just need to:
    • Verify your PAN (Permanent Account Number)
    • Add your Indian bank account
    • Select a Purpose Code
  • To receive local and international payments, here are some of the documents you may need to provide:
After we’ve received the information and confirmed your identity, you’ll be able to receive PayPal payments and withdraw money to your bank account. You can also click Notifications (the bell icon) on your Summary page anytime to track your progress.
 
Follow this link if you have completed your KYC and you are looking for the next steps to receive Rupee payments on your website.
 
Note: What's a purpose code?
In accordance with Indian regulations, you’re required to add a reason for your payments (also known as a "purpose code"). This helps the regulators to understand the exact nature of your cross-border transactions. This purpose code must be in place before you can withdraw money from your PayPal account to your local Indian bank account. You only need to add the purpose code once, and it’ll be used as the default reason for all your payments.
Follow this link to download verified PayPal logos.
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PayPal is required by the U.S. Internal Revenue Service (IRS) to report information about account holders who receive payments for goods and services in excess of certain transaction and payment volume thresholds. This information must be provided for U.S. PayPal accounts and may also be required for account holders outside of the United States (if the holder of a non-U.S. account is a U.S. person).

In order to satisfy these reporting obligations (including filing Forms 1099-K when necessary), PayPal must collect information from our customers (like their TIN and name).

U.S. citizen or other U.S. person/entity

Customers who exceed the reporting thresholds set by the IRS ($20,000 USD and 200 transactions) will be asked to confirm their U.S. taxpayer status and to provide their U.S. taxpayer identification number (SSN, EIN, ITIN) and name.

When you need to confirm your U.S. taxpayer status, we’ll let you know by email and by notifications that you’ll see when you log in to your PayPal account. Click the link provided in the email or in the notification and enter the requested information.

The information you provide will be compared to the information on file with the IRS. If it doesn’t match, you’ll be able to review and edit the information up to three times. If the information cannot be verified, you’ll be asked to also provide your address and certify your information. (This is the same information collected in the IRS Form W-9.)
If you have multiple PayPal accounts, you’ll need to confirm your taxpayer status for each account.

If the IRS has notified you that you are currently subject to backup withholding, don’t submit your information online. Instead, contact PayPal Customer Service for assistance with confirming your taxpayer information at 1-888-221-1161 (1-402-935-2050 if calling from outside the U.S.).

Non-U.S. person/entity
Customers who exceed the reporting thresholds ($20,000 USD and 200 transactions) set by the IRS will be asked to confirm their U.S. taxpayer status. If you are not a U.S. citizen or U.S. entity, you’ll be asked to certify that you’re not subject to U.S. income tax in our online form.

When you need to confirm your U.S. taxpayer status, we’ll let you know by email and by notifications that you’ll see when you log in to your PayPal account. Click the link provided in the email or in the notification and enter the requested information.

If the account owner becomes a U.S. person or entity, or becomes subject to U.S. income tax, the account owner will notify PayPal within 30 days.

State of Vermont and Massachusetts residents

In Vermont and Massachusetts, the reporting thresholds have changed with respect to tax years beginning with 2017 and PayPal is required to report all transactions greater than $600 USD (for Vermont) or $600 USD or greater (for Massachusetts) (instead of $20,000 and more than 200 transactions). All customers in Vermont or Massachusetts who meet the applicable threshold have been requested to provide their TIN and a pre-warning (Compliance-US IRS Verifications) has been placed on their account.

 
The contents of this site are provided for informational purposes only. The information in this article does not constitute legal, financial, IT, business or investment advice of any kind and is not a substitute for any professional advice. You should always obtain independent, professional accounting, financial, IT and legal advice before making any business decision.