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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