Royalty Agreement Template for India

A Royalty Agreement sets out how one party can use another's intellectual property or resources in exchange for regular payments. In India, these contracts commonly cover everything from patent licensing and software rights to mining permissions and franchise arrangements, following guidelines under the Income Tax Act and Foreign Exchange Management Act.

The agreement specifies key details like payment rates (often a percentage of sales or revenues), calculation methods, reporting requirements, and usage limitations. For international royalty payments, Indian companies must comply with RBI regulations and withholding tax requirements, making clear documentation essential for both legal protection and tax compliance.

Use a Royalty Agreement when allowing others to profit from your intellectual property or when using someone else's IP in your business. This applies to licensing patents, trademarks, or copyrighted content in India, especially for technology transfers, franchise operations, or publishing deals. It's particularly important when partnering with foreign companies, as RBI guidelines require proper documentation of royalty payments.

The agreement becomes essential before any commercial use begins, protecting both parties from future disputes over payment terms or usage rights. For Indian businesses, having this agreement in place helps ensure smooth tax compliance, especially regarding TDS obligations and foreign remittance rules under FEMA.

• Software Royalty Agreement: Specifically designed for software licensing, covering usage rights, distribution terms, and technical support obligations
• Royalty License Agreement: Broader template for general IP licensing, commonly used for patents and trademarks in manufacturing
• Royalty Split Agreement: Details how multiple parties share royalty income, popular in entertainment and publishing
• Revenue Royalty Agreement: Links payments to overall revenue rather than profits, common in franchise arrangements
• Royalty Bearing License Agreement: Comprehensive template for technology transfer deals with ongoing payment obligations

• IP Owners: Authors, inventors, software developers, and companies who create and license intellectual property rights for commercial use
• Licensees: Businesses that pay to use others' IP, including manufacturers, publishers, and tech companies implementing patented solutions
• Legal Teams: Corporate lawyers and IP specialists who draft and negotiate terms, ensuring compliance with Indian IP laws and RBI guidelines
• Finance Departments: Handle royalty calculations, payments, and tax compliance, including TDS deductions and foreign remittance reporting
• Industry Regulators: RBI officials and tax authorities who monitor royalty payments, especially for cross-border transactions under FEMA

• IP Details: Gather complete descriptions of intellectual property being licensed, including registration numbers and ownership proof
• Payment Terms: Define royalty rates, calculation methods, minimum guarantees, and payment schedules compliant with RBI guidelines
• Usage Rights: Specify exact scope of use, territorial limits, and any restrictions on sublicensing
• Party Information: Collect legal names, addresses, and authorized signatories of all involved parties
• Compliance Checks: Review FEMA regulations for international agreements and applicable tax implications
• Document Generation: Use our platform to create a legally-sound agreement that includes all mandatory elements and minimizes drafting errors

• Parties and Recitals: Full legal names, addresses, and clear statement of IP ownership and intent to license
• IP Description: Detailed specification of intellectual property being licensed, including registration numbers
• Payment Terms: Clear royalty rates, calculation methods, payment schedules, and audit rights
• Usage Rights: Scope of license, territorial limits, and any restrictions on sublicensing
• Term and Termination: Duration, renewal options, and grounds for early termination
• Governing Law: Specify Indian jurisdiction and applicable state laws
• Compliance Clauses: RBI guidelines for foreign payments and tax implications under Indian law
• Dispute Resolution: Arbitration procedures following Indian Arbitration Act

A Royalty Agreement differs significantly from an Assignment Agreement in both purpose and legal effect. While both deal with intellectual property rights, they serve fundamentally different functions in Indian business law.

• Ownership Transfer: Assignment Agreements permanently transfer IP ownership rights, while Royalty Agreements only grant permission to use IP while retaining ownership
• Payment Structure: Royalty Agreements involve ongoing payments based on usage or revenue, whereas Assignment Agreements typically feature one-time or fixed payments
• Duration: Royalty Agreements are usually time-bound with renewal options, while Assignments are permanent transfers
• RBI Compliance: Royalty payments to foreign entities require specific RBI approvals and ongoing compliance, unlike one-time assignment payments
• Tax Treatment: Royalties face different tax implications under Indian Income Tax Act compared to assignment proceeds, particularly regarding TDS requirements