Short answer
An Export Oriented Unit (EOU) is a unit that undertakes to export its entire production of goods and services, except permitted domestic sales.1 The EOU Scheme sits in Chapter 6 of the Foreign Trade Policy (FTP) 2023, administered by DGFT.1 An EOU must be a positive net foreign exchange earner over blocks of five years.1
| Full form | Governed by | Who needs it | Where it is used | Related terms |
|---|---|---|---|---|
| Export Oriented Unit | Foreign Trade Policy 2023, Chapter 6, administered by DGFT1 | Units that choose to export their entire output, including services and software units; trading units are excluded1 | Approval by the Unit Approval Committee or Board of Approval, with a legal undertaking to the Development Commissioner1 | STP unit, SEZ unit, DGFT, net foreign exchange |
Most Indian freelancers and agencies export services without any special scheme. The Export Oriented Unit (EOU) Scheme is a formal status that some larger exporters choose for the duty and procedural benefits attached to it, in exchange for an undertaking to export their entire output.1
What does an EOU mean in simple words?
An EOU is a unit that commits to export its whole production of goods and services, apart from permitted domestic sales, under Chapter 6 of the FTP 2023, administered by the Directorate General of Foreign Trade (DGFT).1 Paragraph 6.00 says units may be set up under the EOU Scheme for manufacture of goods and also for "rendering of services" and "development of software", while trading units are excluded.1
The EOU label therefore describes a registered status with conditions attached, which a business applies for.
Why does an EOU matter for Indian exporters and freelancers?
An EOU matters mainly to larger exporters that import equipment or inputs at scale and want the scheme's benefits; a freelancer or agency can export services and receive foreign payments without any EOU, STP or SEZ registration.
- Bank compliance: The FEMA and GST rules on export of services apply whether or not you hold EOU status.
- Scheme benefits: The EOU Scheme attaches duty and procedural benefits to the undertaking to export the entire output.1
- Penalties: Failure to meet the conditions can lead to penal action and cancellation of the Letter of Permission (LoP).1
For a typical freelancer, EOU status is optional and rarely needed.
How does an EOU work?
An EOU works by meeting the conditions set out in Chapter 6 of the FTP 2023 for as long as it holds the status.1
| Condition | What the FTP says |
|---|---|
| Net foreign exchange (NFE) | The unit must be a positive net foreign exchange earner, calculated cumulatively in blocks of five years from commencement of production (paragraph 6.04)1 |
| Approval | Applications are considered by the Unit Approval Committee or Board of Approval; an LoP is issued on approval (paragraph 6.05)1 |
| Undertaking | The unit executes a legal undertaking with the Development Commissioner (paragraph 6.05(c))1 |
| Investment | Minimum Rs. 1 crore in plant and machinery, not applicable to information technology and services EOUs (paragraph 6.06)1 |
| Domestic sales by services units | Up to 50% of FOB value of exports and/or 50% of foreign exchange earned, where paid in foreign exchange (paragraph 6.07(b))1 |
How do you get EOU status?
You get EOU status by applying for approval under paragraph 6.05 of the FTP 2023, receiving an LoP and executing a legal undertaking with the Development Commissioner.1
- Application: Considered by the Unit Approval Committee or Board of Approval.1
- Letter of Permission: Issued on approval, and its conditions must then be followed.1
- Undertaking: Executed with the Development Commissioner under paragraph 6.05(c).1
For example, a back-office processing firm, an engineering design studio or a software company might weigh this route. Take advice from a chartered accountant before applying.
What is the difference between an EOU and an STP unit?
An EOU and a Software Technology Park (STP) unit are both covered by Chapter 6 of the FTP, but the STP scheme is a separate scheme for software, approved through the Ministry of Electronics and Information Technology rather than the Development Commissioner.12 STPI describes the STP Scheme as a 100% export-oriented scheme for the development and export of computer software that combines the EOU concept with technology park models.2
| Scheme | Covers | Approved through | Best for |
|---|---|---|---|
| EOU | Manufacturing, services and software units1 | Unit Approval Committee or Board of Approval, with the Development Commissioner1 | Units exporting their entire output of goods or services |
| STP unit | Development and export of computer software2 | Ministry of Electronics and Information Technology12 | Software exporters |
For software, see STPI registration for software exporters.
What do people get wrong about EOUs?
People most often get wrong who needs EOU status and which conditions apply to services units.1
- Freelancers: EOU status is optional; exporting services does not require it.
- Investment: The Rs. 1 crore minimum does not apply to information technology and services EOUs.1
- Trading: Trading units are excluded from the EOU Scheme.1
- Domestic sales: Services EOUs may sell in India within the paragraph 6.07(b) limits.1
Which terms are related to an EOU?
The terms related to an EOU cover the other export schemes and the bodies that run them.
- SEZ: Special Economic Zone units, another export status; see what is an SEZ.
- DGFT: The Directorate General of Foreign Trade, which administers the FTP;1 see what is DGFT.
- STP unit: The software scheme; see STPI registration for software exporters.
- Export of services: The supply that EOU services units make; see what is export of services.
- Export promotion schemes: The wider set of programmes; see export promotion schemes for services.
How did we verify this?
We checked this page against the sources below on 30 October 2026. Read our methodology or report an error.
Frequently asked questions
Can a service business be an EOU?+
Yes. Paragraph 6.00 of the Foreign Trade Policy 2023 says units may be set up under the EOU Scheme for rendering of services and development of software, as well as for manufacture of goods.1 Trading units are not covered, so a business that only buys and resells cannot become an EOU.
Is there a minimum investment for a services EOU?+
The Foreign Trade Policy 2023 sets a minimum investment of Rs. 1 crore in plant and machinery for EOUs.1 Paragraph 6.06 says this minimum does not apply to EOUs in the information technology and services sectors, among others, so a services EOU is not held to that threshold.1
Can an EOU sell services in India?+
Within limits. Paragraph 6.07(b) of the Foreign Trade Policy 2023 allows services and software EOUs to sell in the domestic tariff area up to 50% of the FOB value of exports and/or 50% of foreign exchange earned, where payment is received in foreign exchange.1 Sales above that limit fall outside the paragraph.
What are the objectives of the EOU Scheme?+
Chapter 6 of the Foreign Trade Policy 2023 states the objectives of the EOU Scheme as promoting exports, enhancing foreign exchange earnings, attracting investment for export production and generating employment.1 Those objectives explain why the scheme asks each EOU to export its entire output and to stay a positive net foreign exchange earner.
What happens if an EOU does not achieve positive net foreign exchange?+
Under Chapter 6 of the Foreign Trade Policy 2023, failure to achieve positive net foreign exchange, or to follow the Letter of Permission conditions, can lead to penal action under the Foreign Trade (Development and Regulation) Act and cancellation of the Letter of Permission.1 An EOU should track its net foreign exchange position across each five-year block.
This page is general information for Indian service exporters, not tax or legal advice. Rules change and outcomes depend on your facts, so confirm with a chartered accountant before acting.
Keep reading
How does STPI registration work for software and IT services exporters?
How the Software Technology Park scheme works under FTP 2023 Chapter 6, who registers with STPI, documents, published STPI Bengaluru charges and the EDF role from 2026.
SetupWhich export promotion schemes are available to service exporters in India?
Export promotion schemes open to Indian service exporters in October 2026: status holder, EPCG, STP and EOU, the Export Promotion Mission, and what happened to SEIS.
GlossaryWhat is an SEZ?
An SEZ is a zone notified under the SEZ Act, 2005 that is treated as outside India's customs territory. What it means for Indian service exporters.
GlossaryWhat is DGFT (Directorate General of Foreign Trade)?
DGFT is the Directorate General of Foreign Trade, under the Ministry of Commerce and Industry. What it does for service exporters: IEC, e-BRC and FTP benefits.