Freelancer Payment Methods Comparison
Detailed comparison of payment gateways for receiving foreign payments
Complete Comparison Table
| Feature | PayPal | Wise | Direct Bank Transfer (SWIFT) |
|---|---|---|---|
| Transaction Fee | 4.4% + fixed fee | 0.5-1% | $15-40 flat |
| Conversion Rate | 3-4% markup | Mid-market rate ⭐ | 2-3% markup |
| Speed | Instant | 1-2 days | 3-5 days |
| Withdrawal to Bank | ₹50 + 3-5 days | Free, instant | Direct to bank |
| Best For | Small amounts, urgent | Regular payments | Large amounts |
Real Cost Comparison: $1,000 Payment
| Item | PayPal | Wise Best! | Bank Transfer |
|---|---|---|---|
| Amount | $1,000 | $1,000 | $1,000 |
| Transaction Fee | $44 (4.4%) | $7 (0.7%) | $25 |
| FX Loss | ~₹2,500 (3%) | ₹0 (Mid-market) | ~₹1,650 (2%) |
| Withdrawal Fee | ₹50 | Free | Direct to bank |
| You Get | ~₹78,450 | ~₹82,410 ⭐ | ~₹80,275 |
| Total Loss | ₹4,550 (5.5%) | ₹590 (0.7%) | ₹2,725 (3.3%) |
Verdict for $1,000:
Wise saves you ₹3,960 vs PayPal and ₹1,865 vs bank transfer!
Tax Treatment of Platform Fees
Good News!
All payment gateway fees are fully tax-deductible as business expenses:
- • PayPal fees: Deductible
- • Wise fees: Deductible
- • Bank charges: Deductible
- • Currency conversion losses: Deductible
How to claim: Declare gross amount as income, deduct platform fees as expense in ITR.
GST Implications
PayPal
18% GST charged on fees. You can claim input credit if GST registered.
Wise
International service, no Indian GST. But no input credit either.
Bank Transfer
Bank charges may have GST. Check statement.
When to Use Which Method
Use PayPal When:
- • Amount is small ($100-500)
- • You need money urgently (same day)
- • Client only uses PayPal
- • You value buyer protection features
Use Wise When:
- • Regular monthly payments
- • Amount is $500+
- • You want best exchange rates
- • 1-2 day wait is acceptable
Use Bank Transfer When:
- • Amount is $5,000+ (flat fee makes sense)
- • Corporate client with bank transfer only
- • No urgency (3-5 days OK)
- • Need official bank record for compliance
Documentation for Tax Filing
Maintain these records for all foreign payments:
1. Platform Statements
Download monthly PayPal/Wise statements showing all transactions
2. Bank Credit Entries
Bank statements showing foreign currency credit and INR conversion
3. Fee Invoices
PayPal/Wise fee breakdown for expense claims
4. Client Invoices
Your invoices to clients showing gross amount billed
Conclusion
For most freelancers, Wise offers the best balance of low fees, great exchange rates, and reasonable speed. PayPal works for small, urgent payments but costs significantly more. Direct bank transfers make sense only for large amounts ($5,000+). Whichever method you choose, maintain proper documentation for tax filing and claim all fees as business expenses.
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