Standard Conditions Attached to Approval for Foreign Technology Agreements

The Standard Conditions Attached to Approval for Foreign Technology Agreements are one of the major tools for analyzing the agreement pertaining to foreign transfer of technology.

Standard Conditions Attached to Approval for Foreign Technology Agreements helps in effective inflow of foreign direct investments in India. The criteria for the approval of the Foreign Technology Agreements are -

Standard Conditions Attached to Approval for Foreign Technology Agreement

• The NRI holdings should not exceed the amount mentioned in the approval letter.


• The calculation of the royalty would be done, based on the net ex-factory sale price of the product not including the excise duties and subtracting the cost of standard bought-out components and the cost of imported components, including insurance, ocean freight, customs duties, etc.


• The royalty payment is contained to the licensed capacity and 25% excess pertaining to products needing industrial licensing or on units mentioned in the approval letter.


• For products not requiring industrial license, the restrictions are not applicable.


• A prior approval from the Central Government is necessary for the payment of royalty in case, the production crosses the quantity mentioned in the agreements.


• In case the orders are not been carried out during the time period of the agreement, the royalty is not payable beyond that period.


• The least guaranteed royalty is not allowed.


• Lump sum are to be paid by means of three equated installments such as the first one would be paid subsequent to the approval of agreement proposal by the Reserve Bank of India and it is registered to the foreign exchange, the second installment is given after the legal transfer of the documents pertaining to the technological know how, and the final installment is to be given after the production commences or after 4 years from the time of the approval.


• The exchange rates of the date of payments are followed in case of any payments.


• For hiring of foreign technicians, no permit is required, even if it is not mentioned in the approved agreement.


• In case of sending Indian personnel to abroad for training, the company should approach the RBI.


• The payments in case of foreign testing of basic products and materials are authorized by RBI.

Last Updated on April 17, 2026