Is e-commerce developed in India? Are people buying stuff online, are they paying their taxes online? What's the Internet penetration quotent in India? Any help is much appreciated.

It's really in its infancy. A lot of issues - internet penetration isn't that high yet, people like to have the personalized experience of shopping, people prefer to pay by cash, etc. On the other hand, the ecommerce market is growing rapidly and I'm sure a lot of energetic entrepreneurs will make a lot of money from this.

Yea it is really in its nascent stage, Even in some of the most popular Indian online shopping sites you don't see an option of a Paypal checkout. They still prefer bank transfers.

You can call it a habit but Indians don't really prefer online purchase yet. At least majority does not. And the lack of availability of good high speed Internet connections in the most of the country, except metropolitans that is, also hampers e-commerce. I think it will be quite a while before it becomes popular.