PayPal allows you to refund money for any type of payment, whether it's from a sale or a gift. If you've received a gift payment, you have up to 60 days to refund the money through PayPal. After that time, you will have to send a regular payment, rather than refunding the original one. Refunding gifts is easily accomplished through the transaction details screen.
Log in to your PayPal account.
Click "History" in the top menu bar.
Click the gift payment from the history list.
Click "Issue a refund" in the transaction details page.
Enter the amount that you want to refund into the "Refund amount" field. Click "Continue."
Verify the refund details and click "Issue Refund" to refund the selected amount.