2.2.2 Technology Agreements
For promoting technological competitiveness of the Indian industry , acquisition of foreign technology is encouraged . Foreign technology includes technical know-how , design and drawing , engineering service and royalty .
Payments for royalty and lump sum fee for transfer of technology are permitted under automatic route i . e . without any approval of the Government of India , subject to Foreign Exchange Management ( Current Account Transactions ) Rules , 2000 as amended from time to time .
The royalty payments are ‘ net of taxes ’ and are calculated on the basis of the net ex-factory sale price i . e . sale price of the product less excise duties , cost of the standard bought-out components and the landed cost of imported components ( irrespective of the source of procurement ) including ocean freight , insurance and custom duties .
2.2.3 Use of Trademarks and Brand Name
Payment of royalty for use of trademarks and brand name are also allowed under automatic route without any ceiling . Royalty on brand name or trade mark is to be calculated on net sales i . e . gross sales less agent / dealer commission , transport cost including ocean freight , insurance , duties , taxes and other charges , and cost of raw materials , parts and components imported from the foreign licensor or its subsidiary / affiliated company .
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