In the German Residence Act (Gesetz über den Aufenthalt, die Erwerbstätigkeit und die Integration von Ausländern im Bundesgebiet), it is stated in Section 9 that to obtain a permanent settlement permit (Niederlassungserlaubnis), the foreigner should have a sufficient command of the German language. Also, in Section 19, it is stated that the time required for holders of an EU Blue Card are to be issued with a permanent settlement permit can be reduced from 33 months to 21 months, if the foreigner has a sufficient command of the German language.
The Act further defines "sufficient command" to mean B1 level in terms of CEFR.
However, I am not sure what would practically serve as a proof of this "sufficient command of German". The Nationality Act (Staatsangehörigkeitsgesetz) refers to exams leading to the Zertifikat Deutsch, which seems to basically be the B1 certificate issued by Goethe-Institut. However, there also exist other types of German exams, such as TestDaF and DSH, commonly used for university applications. I wonder whether results from those exams could also be used as a proof, and if so, what would the conversion scale be between their scores and B1 level. Also, I'm not sure if certificates issued from other organizations, such as the foreign language center from a German university, would count.
This issue was a bit confusing for me since many German universities apparently prefer TestDaF or DSH to Goethe-Institut certificates. For example, University of Stuttgart requires Goethe C2 certificate... which sounds practically impossible. If this is the case, does that mean students who initially came to Germany with TestDaF would need to obtain the Zertifikat Deutsch again, just for the purpose of permanent settlement application? Could the reason for universities' aversion towards Goethe certificates be that they are easier to obtain than the other two exams (which I doubt)?
If a certificate from Goethe-Institut is required for the permanent residence permit/blue card application, then I guess I should start preparing towards them instead of TestDaF. I'm already studying in a German university in a program taught in English, so I didn't need those exams in the beginning.