Your query is whether you can get paid via PayPal from overseas to India.
The flow of funds into and out of India is regulated strictly by FEMA - Foreign Exchange Management and RBI guidelines
For money getting into India from overseas, RBI has three approved modes
1.IFS- International financial system platform of Universal post union via post offices
2.RDA-Rupee Drawing Arrangement
2.MTSS - Money transfer service scheme
RDA is primarily used for inward transfer into India between two private/individual accounts. It is used sometimes for trade with a limit of Rs 15 lakhs.
MTSS - is for personal transfers from abroad into India for family and for tourists coming into India.
I don't know of an STP - straight through processing STP wherein overseas banks can send money to your Indian bank account ( unless its an NRI account)
Receiving money via Paypal has two options Paypal for small business and Paypal for freelancers.
The PayPal for small business, the charges depends on the volume of business conducted.
A rough guideline is if you are the receiver of money from overseas, the charges are 4.4%+ 0.30 dollars as transaction charges. Then there are the conversion charges wherein the rough amount lost is 2.5%-3.5% when you transfer the money from the Paypal account to your Indian bank account.
The other option is other sites like Payoneer.
Receiving foreign funds attract the attention of the RBI and IT department, would suggest discussing with your Chartered accountant and the manager of the branch (where the overseas money would come in finally) to avoid any legal hassles.