[[cS]Owain]

A friend of mine is from India he has paypal and he told me that he had a similar issue.
Turns out, you can only send payment for goods or service not as a gift in India!
Simply ask the sender of payment to select 'service' as payment reason not gift, family or anything.

Oh and after you have received the payment you will need a bank account linked and confirmed to your paypal account to cashout.