how much should i charge?

I am running a blog on indian taxes having PR 2. Today i got an mail from some ad agency wanted to buy textlink ads on one of my blog post. Please tell what should i charge?

One more thing, i have read that selling text link ads is bad practice and google penalize for the same. Please guide me

If I understood Matt Cutts (that guy from google) right, Text Link Ads will be penalized. But I'm no expert at this topic.

Text links ads will not be penalized unless they are junk.

You do not sell links, you sell advertising space that links to your advertiser. They may link to their site, but that is out of your control. Be specific that you are NOT selling links.

In the US I get $40 or so a month for a banner ad above the fold. I have sold text advertising in a few cases for 10 a month..

You may have to ask them what they think id fair market value in your marklet. If you have a lot of traffic, charge more.