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Is it acceptable to receive payment from U.S. in Indian saving bank account via PayPal?
It is fine to receive payments into Indian Savings Bank account. There are no restriction on deposits. There are only restrictions on number of withdrawls in a quarter.  A Current[a.k.a Checking] account makes it easier to manage. You haven't asked about tax, but I you may already know you would need to pay taxes irrespective of whether you got the money in Savings or Current account. Edit: Any individual can open a Current Account on individual's name. There is no restriction. There are multiple aspects to determine whether the activity you are doing is a service as defined by the Service Tax Rules. Please consult a CA to guide you. For less than 5K INR he would not only advice you but also do everything required to file taxes.