The Government of India has eased the existing rules for payment of royalties under foreign technology collaboration. The existing policy providedfor automatic approval for foreign technology transfers involving payment of lumpsum of US $2 million and payment of royalty of 5% on domestic sales and 8% on exports. In addition, where there was no technology transfer involved, royalty of upto 2% for exports and 1% for domestic sales was allowed under automatic route on use of trademarks and brand names of the foreign collaborator. Payments above this required regulatory approval.

The new policy removes all such restrictions on payments for royalty, lumpsum fee for transfer of technology and payments for use of trademark/brand name and puts it on the automatic route i.e. without any approval of the Government of India. However all such payments will be subject to Foreign Exchange Management (Current Account Transactions) Rules, 2000, (FEMA) as amended from time to time.

Such a move is expected to increase the foreign investment and transfer of technology to India.