@kaka135 PAN Card is Permanent Account number issued by Indian Income Tax Department to Indian citizens which is a complete proof for obtaining almost every government documents including opening account in a bank. PayPal asks for PAN card number and Debit/Credit card details and then sends 2-3 small amounts to applicants account to make sure they are dealing with right persons. At my present location a debit/credit card is sufficient to open an account instantly.
In case of the Indian users you can see that PAN card and the Aaadhar card seems to be requirement now. And in future paypal is going to have the local patent and the documentation. So we would be allowed to have the balance in account. So I guess we would be giving documents in near future too. So proof is something you have to give to those payment processor.
Like everyone has suggested, if you have not already done so, is to contact Paypal customer care directly to be sure the email is from them. I know they can ask you this if you live in a country you are not a citizen of. Oftentimes the rules are there for our protection and to ensure you are able to always get your money. I have heard horror stories of some accounts being closed permanently due to identity not being verified.
This will be almost three years of me owening a paypal account and I have never had to provide proof of identity. That email could be a scam so be careful and make sure it came directly from paypal. I wouldn't trust that email if they ask for such information all of a sudden. Maybe it's because my account is not yet varified I really wouldn't know.
@kamai it's different in different country. I can tell you about two countries with extremely different set of rules. As far Indian users are concerned they have to submit proper proof of their bank account providing required documents and attaching their PayPal account with bank account with a proper verification by PayPal and even then Indian users are not allowed to transact but transfer their funds to bank (On aut). I live in a country where I can open a PayPal account using my credit card within 1 minute without attaching it to any bank and transact as I like.
You are right it must be different as I have tried to verify my account but my paypal hasn't accepted it and it has almost been a year since I have tried. One of my friends here also tried and finally got it varified but when she tries to send money to her bank account it takes months before she can receive it so we both opt to spend our paypal money shopping online.
