How Australia Taxes Your Indian Shares, Funds and Rent, and the 50% CGT Discount Most NRIs Miss

You moved to Sydney or Melbourne on a skilled visa, you kept your Indian portfolio running because the rupee returns looked good and the money was already in India, and you have quietly assumed that your Indian shares, your SIPs, your NRO fixed deposit interest and the rent from your Pune flat are an India-only problem that the Australian Taxation Office never sees. That assumption is wrong, and it is the most common and most expensive mistake I see among Indians who have become Australian tax residents. Australia taxes its residents on their worldwide income, which means every rupee of Indian dividend, interest, rent and capital gain is assessable in Australia, at marginal rates that climb to 45% plus the 2% Medicare levy. The good news, and almost nobody I speak to knows this, is that the same Australian system hands you a 50% capital gains tax discount on assets held at least 12 months and a Foreign Income Tax Offset for the Indian tax you already paid. Used together, they usually stop you being taxed twice.

The 30-second answer: If you are an Australian tax resident, you are taxed on worldwide income, so your Indian dividends, NRO interest, Indian rent, and capital gains on Indian shares and mutual funds are all assessable in Australia at marginal rates up to 45% plus 2% Medicare, on top of Indian tax. Two reliefs apply. First, the 50% CGT discount: if you held a CGT asset at least 12 months, only half the gain is taxed at your marginal rate, and this covers Indian shares, fund units and property. Second, the Foreign Income Tax Offset (FITO) gives you credit for Indian tax paid, including TDS and Indian CGT, capped at the Australian tax on that income. The India-Australia DTAA allocates taxing rights and supports the offset. Gains are computed in Australian dollars, so rupee movement changes the AUD gain.

This guide is written for the Australian side of your financial life, not the Indian side. It is for the Indian who is now an Australian tax resident, whether on a permanent visa, citizenship, or a subclass 482 skilled visa, and who still holds Indian assets. What follows is how Australia decides you are a resident and why that pulls your Indian income into charge, exactly which Indian income streams are assessable, how the 50% CGT discount works and why so many NRIs forget it applies to Indian assets, how the Foreign Income Tax Offset prevents double tax and where its cap bites, a full worked example on a Rs 20,00,000 long-term gain on Indian shares showing the Indian tax, the discounted AUD gain, the Australian tax and the offset, the edge cases including temporary residents and the subclass 482 exemption, foreign-resident loss of the discount, currency, and mutual fund distributions, and the honest read on what to actually do.

Why Australian residency pulls your Indian income into charge

Start with the fact that does the damage, because it is the one most NRIs in Australia have never properly internalised. Australia taxes its tax residents on worldwide income and worldwide capital gains. It does not matter that the asset sits in India, that the income is paid into an Indian bank account, that India has already taxed it, or that you never bring a single dollar of it to Australia. If you are an Australian tax resident for the year, the income is assessable on your Australian return.

That makes your tax residency the single fact that decides everything. Australia tests residency through several routes, broadly the ordinary concepts test (do you reside here), the domicile test, the 183-day test, and the superannuation test. For a typical Indian who has relocated to Australia for work, settled the family, and rented or bought a home, the answer is usually that you are an Australian tax resident from the point you make Australia your home, even on a temporary visa. Residency is a question of fact, not of which visa you hold, and the visa subclass mainly matters for the temporary-resident concessions discussed in the edge cases.

Once you are a resident, the structure is simple to state and important to absorb:

• Your Indian dividends are assessable in Australia.
• Your Indian interest, including interest on an NRO account or NRO fixed deposit, is assessable in Australia.
• Your Indian rental income, net of allowable expenses, is assessable in Australia.
• Your capital gains on Indian shares, mutual fund units and property are assessable in Australia.

India taxes much of this too, at source or through your Indian return, so the same income is in charge in both countries. That is not double taxation in the final sense, because the Foreign Income Tax Offset and the India-Australia Double Taxation Avoidance Agreement are built precisely to relieve it. But the starting point you must accept is that the Indian income does not vanish from the Australian system. It belongs on your Australian return whether or not you remit it.

The Indian income streams, one by one

Take the four streams in turn, because the Australian treatment and the Indian tax interaction differ for each.

Indian dividends. Since the abolition of the dividend distribution tax regime, Indian dividends are taxed in the shareholder's hands in India, and for an NRI the company or registrar deducts TDS, commonly at 20% before treaty relief, with the India-Australia DTAA generally capping the dividend withholding at a lower treaty rate. In Australia, the gross Indian dividend is assessable income at your marginal rate. The Indian tax withheld becomes a FITO credit. You do not get Australian franking credits on an Indian dividend, because franking attaches only to Australian company tax, so an Indian dividend is fully taxable in Australia with only the FITO to relieve the Indian withholding.

Indian interest, including NRO interest. Interest on an NRO account or NRO deposit is Indian-source income, taxed in India by TDS (commonly around 30% for an NRO, reducible under the DTAA). NRE and FCNR interest is exempt in India while you are an NRI, but that Indian exemption does not make it exempt in Australia. As an Australian resident, interest from any Indian account is assessable in Australia at your marginal rate, and only the Indian tax actually paid generates a FITO credit. So NRE interest, tax-free in India, is still taxable in Australia with no offset because no Indian tax was paid on it. This surprises people, so plan for it. The mechanics of the Indian side are in tax on NRO interest and the account types in NRE, NRO and FCNR accounts.

Indian rental income. Rent from Indian property is assessable in Australia, computed in Australian dollars, after allowable deductions. Australia lets you deduct expenses on the same broad lines you would for an Australian rental, including interest, rates, repairs and a depreciation treatment, though the rules are not identical to India's standard 30% deduction, so the net figure you report in Australia is computed under Australian rules, not simply the Indian taxable rent converted across. The Indian tax paid on the rent is a FITO credit.

Capital gains on Indian shares, funds and property. This is where the 50% discount lives, and it is the heart of this guide, so it gets its own sections below.

The thread running through all four is the same: assessable in Australia, computed in Australian dollars, relieved by the Foreign Income Tax Offset for Indian tax paid, and underpinned by the treaty.

The 50% CGT discount, the relief most NRIs never claim

Here is the concession that changes the arithmetic, and the one I most often have to point out to Australian-resident NRIs who have been overpaying or over-worrying. Australia gives individuals a 50% capital gains tax discount on a capital gain where the CGT asset has been held for at least 12 months before the CGT event. Only half the gain is then included in your assessable income and taxed at your marginal rate.

The discount is not restricted to Australian assets. It applies to a CGT asset wherever it sits in the world, provided you are an Australian tax resident and the 12-month holding test is met. That means your Indian listed shares, your Indian mutual fund units, and your Indian property all qualify for the 50% discount on the gain, as long as you held them for more than 12 months. A long-term holding of Infosys shares bought through your demat account three years ago, sold while you are an Australian resident, gets the discount. A SIP-built mutual fund holding you have run for five years gets the discount on units held more than 12 months.

The practical effect is large. Without the discount, a gain converted to, say, 36,000 AUD would be taxed in full at your marginal rate. With the discount, only 18,000 AUD enters your assessable income. At a 45% marginal rate that is the difference between roughly 16,200 AUD and 8,100 AUD of gross Australian tax before any offset. Most NRIs in Australia simply do not know the discount reaches their Indian assets, so they either overstate their Australian liability or, worse, assume the Australian position is hopeless and do not plan around it at all.

Three conditions to keep straight, because each has caught readers out:

• The asset must be held at least 12 months. Units or shares held 12 months or less are taxed on the full gain with no discount, exactly as a short-term gain.
• The discount is for individuals (and trusts), not companies. If you hold Indian assets through an Australian company structure, the 50% discount is not available.
• The discount is reduced for periods you were a foreign resident or a temporary resident after 8 May 2012. This is the most important qualifier for a recent migrant and is covered in the edge cases.

The discount is what makes holding Indian growth assets from Australia far more tolerable than the headline 45% rate suggests, and it is the first thing to get right on your return.

The Foreign Income Tax Offset, and where its cap bites

The second relief is the Foreign Income Tax Offset (FITO). Where the discount cuts the Australian base, the FITO credits the Indian tax you have already paid against the Australian tax on the same income, so you are not taxed twice on the same money.

The rule is straightforward in principle. If you paid foreign tax on an amount that is also assessable in Australia, you get a credit for that foreign tax against your Australian tax. Indian TDS on your dividends, interest or rent counts. Indian capital gains tax on a share sale counts. The credit is dollar for dollar, converted to Australian dollars at the relevant rate.

The catch is the FITO limit, the cap that determines how much of your Indian tax you can actually use:

• For total foreign tax of 1,000 AUD or less in the year, you can claim the lot without a detailed calculation. This is the de minimis position and covers many smaller NRO-interest and dividend cases.
• Above 1,000 AUD, your FITO is capped at the Australian tax payable on your foreign income, broadly the difference between your Australian tax with the foreign income included and your Australian tax with it excluded, plus a few adjustments. In effect you can credit your Indian tax only up to the Australian tax on that same foreign income.

The asymmetry that matters: if the Indian tax is lower than the Australian tax on the income, you claim all of it and pay the gap in Australia. If the Indian tax is higher, you can only use it up to the Australian tax on that income, and the excess Indian tax is generally lost, not refunded and, importantly, not carried forward in the way some other countries allow. So the FITO stops double taxation, but it does not reduce your worldwide cost below the higher of the two countries' tax on the income.

For Indian listed shares this usually works in your favour, because India's long-term rate of 12.5% is below an Australian 45% marginal rate, so the Indian tax is fully creditable and you pay the difference. For high-TDS items such as NRO interest taxed at 30% in India, the Indian tax can approach or exceed the Australian tax on that slice, and any excess is wasted, which is a reason to use the DTAA to bring the Indian withholding down to the treaty rate. The offset is claimed on your Australian return; the Indian-side machinery is in foreign tax credit and Form 67, and the treaty allocation in the India-Australia DTAA deep dive and DTAA relief for NRIs.

A worked example: a Rs 20,00,000 long-term gain on Indian shares

Numbers make this concrete, so take an ordinary case and follow it through both countries.

Priya moved to Melbourne in 2021, is now an Australian tax resident (not a temporary resident), and is in the top marginal bracket, so her marginal rate is 45% plus the 2% Medicare levy, an effective 47%. She has held a portfolio of Indian listed shares in her demat account for more than three years. In the 2025-26 year she sells, realising a long-term capital gain of Rs 20,00,000.

To keep the arithmetic clean, assume an exchange rate of Rs 55 to AUD 1 at the relevant times. Use your actual rates on the acquisition and sale dates for a real return; the proportions hold.

Step 1: the Indian tax under Section 112A

The shares are listed and held long term, so India taxes the gain under Section 112A at 12.5% on the amount above the Rs 1,25,000 annual exemption (the rate and exemption that apply to transfers on or after July 23, 2024):

• Taxable gain: Rs 20,00,000 minus Rs 1,25,000 = Rs 18,75,000.
• Indian tax: Rs 18,75,000 times 12.5% = Rs 2,34,375 (ignoring surcharge and cess for clarity).
• In Australian dollars at Rs 55: Rs 2,34,375 divided by 55 = about AUD 4,261.

This is the Indian tax actually paid, which becomes the FITO credit.

Step 2: the Australian gain after the 50% discount

Australia computes the gain in Australian dollars. The full gain converts as Rs 20,00,000 divided by 55 = about AUD 36,364. Because Priya held the shares more than 12 months and is a resident, the 50% CGT discount applies:

• Full AUD gain: AUD 36,364.
• After 50% discount, the amount included in assessable income: AUD 36,364 times 50% = about AUD 18,182.

Only that AUD 18,182 is added to her Australian taxable income, not the full AUD 36,364. This is the step almost everyone misses.

Step 3: the Australian tax on the discounted gain

The discounted gain is taxed at her marginal rate of 47% (45% plus 2% Medicare):

• AUD 18,182 times 47% = about AUD 8,545 of Australian tax on the gain.

Step 4: the Foreign Income Tax Offset

The Indian tax of about AUD 4,261 is creditable as a FITO, capped at the Australian tax on that foreign income (about AUD 8,545 here). Since the Indian tax is below the cap, the full AUD 4,261 is allowed:

• Australian tax on the gain: AUD 8,545.
• Less FITO for Indian tax: AUD 4,261.
• Net additional Australian tax: about AUD 4,284.

The result, stated plainly

• India collects about AUD 4,261 (Rs 2,34,375).
• Australia collects about AUD 4,284 on top.
• Total tax across both countries: about AUD 8,545 on an AUD 36,364 gain, an effective rate of roughly 23.5% on the whole gain.

Notice what the two reliefs did. The 50% discount halved the Australian base, so the Australian tax on the gain was about AUD 8,545 rather than about AUD 17,091. The FITO then credited the Indian tax in full, so Priya was not taxed twice. Her all-in cost settled at roughly the Australian tax on the discounted gain, with India's 12.5% absorbed inside it. Had she ignored the discount and assumed she owed 47% on the full AUD 36,364 with no offset, she would have feared a bill of around AUD 17,000. The honest read on the numbers: between the 50% discount and the FITO, an Australian-resident NRI selling long-held Indian shares often pays an effective rate not far above 20%, not the 47% the headline marginal rate implies.

Edge cases

The general position, that Australian residents are taxed on worldwide Indian income with a 50% CGT discount and a FITO, holds for most readers. Several situations change it, and each one catches people.

Temporary residents and the subclass 482 exemption. If you are a temporary resident for Australian tax purposes, broadly someone holding a temporary visa such as a subclass 482 skilled visa who meets the temporary-resident tests, you have a materially different and more favourable position under the temporary-resident concessions in the tax law. Most of your foreign-source income is exempt from Australian tax while you are a temporary resident, and your foreign capital gains on non-Australian assets are generally disregarded for Australian CGT. In plain terms, while you genuinely qualify as a temporary resident, your Indian dividends, your Indian interest, and your gains on Indian shares and funds can fall outside the Australian net, so the worldwide-income rule above does not bite in the same way. There are exceptions, notably for foreign employment income relating to your work in Australia, and the concession ends the moment you become a permanent resident or citizen, at which point the full worldwide-income rules switch on. If you are on a 482 visa, confirm your temporary-resident status carefully, because it can save substantial tax while it lasts and the planning around the transition to permanent residency is worth doing in advance.

Losing the discount as a foreign resident. The 50% discount is reduced or denied for periods you were a foreign resident or a temporary resident after 8 May 2012. If you acquired Indian shares while abroad and sell them after some years of Australian residence, the discount is apportioned for the days you were not an Australian resident, so you may get less than the full 50%. This cuts the other way for departing residents too: if you later cease to be an Australian resident and sell, the discount on assets is restricted for the non-resident period. The interaction with how Australia treats the cost base when you arrive is covered in Australia NRI deemed acquisition and cost base, and the departure side, especially for property, in Australia NRI property CGT on departing.

Currency movement is part of the gain. Because Australia computes the gain in Australian dollars, your cost base is the AUD value at acquisition and your proceeds are the AUD value at sale. If the rupee weakened against the Australian dollar over your holding period, your AUD gain is smaller than your rupee gain, and it is even possible to have a rupee profit but an AUD loss, or the reverse. You cannot report the rupee gain and convert the tax; you must build the gain in dollars from the start. This currency effect is unavoidable and is its own planning point, discussed in currency hedging for NRI investors.

Mutual fund distributions, not just sales. A sale of mutual fund units is a CGT event, but Indian funds also make distributions, and any income distributed to you is assessable in Australia as it arises, in the year of distribution, converted to dollars. Australia has no reporting-fund concept like the United Kingdom, so there is no special punitive regime for Indian funds here, they are taxed under the ordinary rules. But that also means you must track distributions as income and unit sales as capital gains separately, and a switch between Indian funds is a disposal of the old units, a CGT event, even though no money reaches your bank. The fund-eligibility side is in NRI mutual fund eligibility and the Indian capital gains mechanics in capital gains tax on NRI shares and mutual funds.

Short-term gains get no discount. If you held the Indian shares or units 12 months or less, there is no 50% discount and the whole AUD gain is taxed at your marginal rate. India also taxes short-term gains on listed equity at a higher rate, so a quick in-and-out trade on Indian shares is taxed hard on both sides, with the FITO relieving only the overlap.

The closing read

Here is the honest read, scoped to who you are.

If you are a permanent Australian tax resident with Indian assets, stop treating your Indian portfolio as invisible to the ATO. It is not. Your Indian dividends, your NRO interest, your Indian rent and your Indian capital gains are all assessable in Australia, and the gains are computed in Australian dollars so currency moves with you. But do not over-fear it either, because the two reliefs are genuine and generous. The 50% CGT discount halves the Australian tax on any Indian share, fund or property gain where you held the asset more than 12 months, and it reaches your Indian assets just as it reaches Australian ones. The Foreign Income Tax Offset then credits the Indian tax you already paid, so you are not taxed twice. On a Rs 20,00,000 long-term gain on Indian shares, the combined effect is an all-in cost of roughly 23% of the whole gain, not the 47% the top marginal rate implies. The single most common error I see is an NRI who either ignores the Australian charge entirely, which is non-compliance, or assumes it is 47% on the full gain and panics, when the real number is far lower once the discount and the offset do their work.

If you are on a subclass 482 or other temporary visa, your position is different and, for now, better. While you genuinely qualify as a temporary resident, most of your Indian income and your Indian capital gains are outside the Australian net. That window is valuable and it is finite. Use the temporary-resident years to think about what you want crystallised before you become a permanent resident, because the day you do, the worldwide-income rules switch on in full and the planning options narrow. Get advice on the transition before it happens, not after.

For everyone, the practical discipline is the same. Keep your acquisition dates and AUD cost bases for every Indian holding, because you cannot compute the discount or the gain without them. Track distributions as income and unit sales as capital gains separately. Claim the FITO for every rupee of Indian tax you paid, and use the DTAA to bring high Indian withholding, especially NRO interest at 30%, down to the treaty rate so you do not waste an offset you cannot fully use. This is an area where a cross-border adviser licensed for both Australian and Indian tax earns their fee, because the interaction of the discount, the FITO limit, the currency conversion and the temporary-resident rules is genuinely too involved to eyeball on a large gain.

Related guides

• The India-Australia DTAA deep dive
• Australia NRI deemed acquisition and cost base
• Australia NRI property CGT on departing
• Foreign tax credit and Form 67
• Capital gains tax on NRI shares and mutual funds
• DTAA relief for NRIs
• Tax on NRO interest
• NRI residency and RNOR rules
• NRI mutual fund eligibility
• Tax-efficient investing for NRIs
• NRI portfolio and asset allocation
• NRI retirement planning across two countries
• NRE, NRO and FCNR accounts
• Currency hedging for NRI investors

This guide is general information for Australian-resident NRIs with Indian investments and is not tax, legal, or investment advice. Australian tax residency, the worldwide-income rules, the 50% CGT discount and its reduction for foreign-resident and temporary-resident periods after 8 May 2012, the temporary-resident foreign-income concessions, the Foreign Income Tax Offset and its limit, the Medicare levy, and the India-Australia treaty are complex, fact-specific, and can change; proposed changes to the CGT discount and the foreign-resident CGT regime were before Parliament when this was written and may alter the position. The figures in the worked example are illustrative and use assumed rates, the top marginal bracket, and a round exchange rate; Indian rates and TDS depend on the asset, holding period, and treaty relief, and the Section 112A rate of 12.5% above Rs 1,25,000 applies to transfers on or after July 23, 2024. Confirm your own position with a qualified cross-border tax adviser licensed for both Australian and Indian tax before you buy, hold, switch, or sell any Indian asset.