The India-Australia DTAA for NRIs in Australia: Treaty Rates, the Worldwide-Income Trap, and How to Claim Relief on Both Sides

A Sydney-based reader on a permanent visa earned Rs 6,40,000 of NRO fixed-deposit interest in India last year, watched his bank withhold roughly Rs 1,98,000 at the full non-resident rate, and then declared the gross Rs 6,40,000 again on his Australian return because his accountant said worldwide income is worldwide income. He was right to declare it. He was wrong about almost everything else. He could have capped the Indian tax at 15% with two documents he never filed, and he could have claimed most of what he did pay back as an Australian offset instead of being taxed twice on the same rupees. The treaty he had never read was written precisely for his situation.

The 30-second answer: The India-Australia DTAA, in force since 30 December 1991, caps Indian tax at 15% on your NRO interest (Article 11) and Indian dividends (Article 10), against domestic non-resident rates of about 30% and 20% respectively, but only if you give your Indian payer a Tax Residency Certificate and an online Form 10F. It does not exempt your Indian capital gains: Article 13 leaves shares, funds and property taxable in India, so you pay India and claim an Australian foreign income tax offset capped at the Australian tax on that income. Australia taxes residents on worldwide income, so Indian income is declared again in Australia with the offset preventing double tax. If you are a temporary resident (most subclass 482 holders), most Indian income is non-assessable in Australia entirely.

This guide assumes you already know what an NRO account is, how Indian capital gains are computed, and what your residency status means in India. If those are shaky, read the residency and RNOR guide and the capital gains guide first. This one is about the part that sits between two tax systems: which country gets to tax what, at what rate, and how an Australia-resident NRI stops paying twice. For the year-end mechanics of putting all this on an Indian return, the master walkthrough is the ITR filing guide for AY 2026-27.

The treaty does two different jobs, and people confuse them

There are two ways a tax treaty can help you, and the India-Australia DTAA does one of them generously and the other one not at all. Understanding which is which is the whole game.

The first job is rate reduction at source. For passive income that arises in India and flows to an Australian resident, the treaty caps the Indian withholding rate below India's domestic rate. NRO interest and Indian dividends both fall here, and the cap is 15%. This is a real, bankable saving you collect at the moment the income is paid, provided you have done the paperwork.

The second job is allocating the taxing right entirely to one country. Some treaties say a particular kind of income is taxable only in the country of residence, which means the source country gives up its tax completely. The India-UAE treaty famously does this for capital gains on shares, which is why a Dubai resident can pay zero Indian tax on listed-share gains. The India-Australia treaty does not do this for capital gains. Article 13 leaves the gains taxable in India under Indian law, full stop.

So if you have read that "the DTAA can make your Indian tax zero", understand that this is true for some treaties and some income types, and it is simply not true for an Australian resident's Indian capital gains. The treaty still helps you there, but through Australia's offset mechanism, not through an Indian exemption. Mixing these two up is the single most expensive misconception Australian NRIs carry. The general framework, country-agnostic, is in DTAA relief for NRIs; what follows is the Australia-specific application.

The 15% cap on NRO interest is the easiest money you will ever leave on the table

Start with the income most Australian NRIs actually have: interest on NRO deposits, the rent and dividends that land in an NRO account, the fixed deposits funded from money that was already in India. NRO interest is taxable in India, and for a non-resident the domestic TDS rate runs to 30% plus surcharge and cess, which is roughly 31.2% at the base and higher once surcharge bites. That is the rate your bank applies by default.

Article 11 of the India-Australia DTAA caps the Indian tax on that interest at 15%. The gap is enormous: on the same deposit you can be taxed at 15% or at 31.2%, a difference of more than half the tax. And unlike capital gains relief, there is no ambiguity and no debate. The 15% cap is in black and white in the treaty, and the Indian system is built to apply it at source.

Here is what the gap looks like with numbers. Take Anjali, a permanent resident of Australia, who holds Rs 50,00,000 in NRO fixed deposits earning 7%, so Rs 3,50,000 of interest in the financial year.

If she does nothing, her bank deducts TDS at the domestic non-resident rate. At 30% plus 4% cess, that is about Rs 1,09,200 withheld. If she lodges a valid TRC and Form 10F with the bank before the interest is credited, the bank deducts at the treaty rate of 15% plus cess, about Rs 54,600. The difference is Rs 54,600 kept in her account rather than locked with the Indian government for a year, on a single year's interest from one set of deposits.

The counterfactual most people actually live is worse than either. If Anjali files nothing, lets the bank withhold Rs 1,09,200, and then never files an Indian return to reclaim the excess over her true treaty liability, she has simply donated the difference. The 15% rate is not lost only because the documents were late; it is lost permanently if she also fails to file the return that would recover it. The mechanics of NRO interest taxation, including the slab interaction, are covered in depth in tax on NRO interest, and the choice of which account to hold the deposit in sits in NRE, NRO and FCNR accounts. The one-line version: NRE interest is exempt in India for a non-resident, so the treaty question only ever arises on NRO money.

Dividends sit at 15% too, but watch the domestic rate it is measured against

Indian companies pay dividends gross now, and the company deducts TDS before the money reaches you. For a non-resident the domestic rate on dividends is 20% plus surcharge and cess. Article 10 of the India-Australia treaty caps it at 15%.

The saving is smaller than on interest because the domestic dividend rate (20%) is already lower than the domestic interest rate (30%), but it is still real, and it stacks across a portfolio. On Rs 4,00,000 of Indian dividends, the domestic deduction is about Rs 83,200 at 20% plus cess, and the treaty deduction is about Rs 62,400 at 15% plus cess, a saving of roughly Rs 20,800 a year. Across a large Indian equity holding, that compounds into real money.

The honest nuance: getting the 15% applied at source on dividends is administratively fiddlier than on bank interest, because the deducting party is the company's registrar and transfer agent, not your relationship bank, and not all of them process Form 10F smoothly for retail holders. Many Australian NRIs end up taking the 20% deduction at source and reclaiming the 5% gap on their Indian return. That is annoying but not lost money, as long as the return is filed. Whether you collect the relief at source or at filing, the underlying entitlement is the same 15%.

Capital gains: the treaty does not save you in India, so the relief is on the Australian side

This is where Australian NRIs are most often misinformed, usually by advice written for Gulf residents. Article 13 of the India-Australia DTAA does not assign capital gains to the country of residence. Gains on Indian shares, Indian mutual funds and Indian property remain taxable in India under Indian domestic law, exactly as they would be for any non-resident.

That means the Indian rates apply in full. Listed equity and equity mutual funds: 12.5% long-term on gains above Rs 1.25 lakh a year, 20% short-term, for transfers on or after 23 July 2024. Property held over 24 months: 12.5% long-term with no indexation, and as a non-resident you do not get the 20%-with-indexation alternative that residents can choose. Debt funds bought on or after 1 April 2023: slab rates with no long-term benefit. All of this is unchanged by being Australian rather than American or British, and all of it is laid out in the capital gains guide.

So where does the treaty help? On the Australian side. Australia taxes its residents on worldwide income, which means the Indian gain is also assessable in Australia. To stop you being taxed twice on the same gain, Australia gives a foreign income tax offset (FITO) for the Indian tax you paid, and the treaty is the legal backbone that makes that offset available and consistent. You pay India first, then Australia taxes the gain, then the Indian tax reduces the Australian bill. Net of both, you broadly pay the higher of the two countries' effective rates, not the sum of them.

Put real numbers on a share sale. Vikram, a permanent resident of Australia, sells listed Indian equity mutual funds held four years with a long-term gain of Rs 20,00,000. The first Rs 1,25,000 is exempt, leaving Rs 18,75,000 taxed in India at 12.5%, which is Rs 2,34,375 plus 4% cess, about Rs 2,43,750. At an indicative rate of AUD 1 to Rs 55, the gain is about AUD 36,364 and the Indian tax is about AUD 4,432.

On the Australian side, Vikram declares the gain. Because he held the asset more than 12 months and is an individual, the 50% CGT discount applies, so only AUD 18,182 is included in his assessable income. If his marginal rate is 39% (37% plus the 2% Medicare levy), the Australian tax on the included half is about AUD 7,091. He then claims a FITO for the Indian tax. Net Australian payable after the offset is roughly AUD 7,091 minus AUD 4,432 = AUD 2,659, and his total across both countries is about AUD 7,091, not AUD 11,523. The treaty plus FITO saved him the AUD 4,432 of double tax.

That is the clean version. The real version has a trap, and it is the next section.

The Burton trap: the 50% CGT discount can halve your offset

Here is the thing no Indian-side blog will tell an Australian NRI, because it lives entirely in Australian case law. When Australia gives you the 50% CGT discount on a long-held asset, it only includes half the gain in your assessable income. The Full Federal Court held in Burton v Commissioner of Taxation [2019] FCAFC 141 that because only half the gain is included in Australian income, you only get a FITO for the half of the foreign tax that relates to the included half. India taxed the whole gain; Australia taxes half; so only half the Indian tax is creditable.

Rework Vikram's numbers with Burton applied properly, because the clean version above quietly ignored it. India taxed the full gain and the Indian tax was about AUD 4,432. But only the half of that Indian tax referable to the Australian-assessable half of the gain, about AUD 2,216, is available as a FITO. So his Australian tax of AUD 7,091 is reduced by AUD 2,216, not AUD 4,432, leaving Australian payable of about AUD 4,875. His total across both countries becomes AUD 4,432 plus AUD 4,875, about AUD 9,307, not the AUD 7,091 the naive calculation suggested.

The lost AUD 2,216 is the Burton effect: a slice of genuine double taxation that the discount mechanism creates and that no treaty currently cures. It is not a mistake you can paperwork your way out of; it is how the law operates. The honest planning response is to be aware that the 50% discount, which feels like a pure benefit, partly cannibalises your Indian tax credit, and that on a heavily Indian-taxed long-term gain you may end up marginally worse than a back-of-envelope "pay the higher rate" assumption. For short-term Indian gains, where the Australian discount does not apply, the full Indian tax is creditable and Burton does not bite, so the asymmetry is specific to discounted long-term gains. The general FITO mechanics, including the offset cap and the AUD conversion rules, are worth reading alongside this in foreign tax credit and Form 67, which is India-facing but explains the credit logic that mirrors Australia's.

The temporary-resident exemption: the rule that changes everything if you are on a 482

Everything above assumes you are an Australian tax resident taxed on worldwide income, which is the position of citizens and permanent residents. But a large share of Indian professionals in Australia are not permanent residents yet. They are on temporary visas, most commonly the subclass 482 skilled-worker visa, and for them Australia has a concession that quietly rewrites the entire analysis.

Under Division 768-910 of the Income Tax Assessment Act 1997, a person who is an Australian resident for tax purposes but who holds a temporary visa, and who is not married to or in a de facto relationship with an Australian citizen or permanent resident, is a temporary resident. For a temporary resident, most foreign income is non-assessable non-exempt income, and most foreign capital gains and losses are simply disregarded for Australian CGT purposes. In plain terms: your Indian dividends, your Indian share gains and your Indian property gains are not taxed in Australia at all while the concession applies.

That sounds like a windfall, and for the right person it is. But notice what it does to the double-tax picture. Australia is no longer taxing the income, so there is no Australian liability for the Indian tax to offset against. The Indian tax becomes a final cost. For passive income that means the 15% treaty cap on interest and dividends is now your entire global tax on that income, and it is worth even more to get the TRC and Form 10F right, because there is no second country to mop up the excess. For capital gains it means you pay only the Indian rate, with no Australian top-up and no FITO needed, which is often the lowest total outcome an Australian NRI can achieve.

Two cautions that catch people. First, the concession is not lost-and-found: it ends the instant you become a permanent resident or citizen, or marry an Australian PR or citizen, and it cannot be reinstated. From that day your Indian income flips to fully assessable in Australia with FITO relief, the regime described earlier in this guide. The transition is abrupt, so if you are planning a large Indian asset sale and your permanent residency grant is imminent, the order of events matters: selling Indian shares while still a temporary resident can mean the gain escapes Australian tax entirely, while selling a week after your PR grant pulls the whole gain into the Australian net. Second, the temporary-resident exemption covers foreign income but it does not exempt foreign employment income earned while you are in Australia, and there are specific carve-outs for employee share scheme gains, so if your Indian income is really disguised remuneration, do not assume it is covered.

See how the same Indian dividend behaves in two hands. Priya and Ravi each receive Rs 4,00,000 of Indian dividends, both with TRC and Form 10F filed, so India deducts at 15%, about Rs 62,400. Priya is a permanent resident: she declares the gross Rs 4,00,000 (about AUD 7,273) in Australia, pays Australian tax at her marginal rate, and claims a FITO for the Indian tax, ending up paying broadly her Australian marginal rate in total. Ravi is on a 482 and is a temporary resident: the Rs 4,00,000 is non-assessable in Australia, he declares nothing there, and his entire global tax on that dividend is the Rs 62,400 India already took. Same income, same Indian paperwork, materially different total tax purely because of visa status. That single fact should shape when a 482 holder chooses to realise Indian income.

The treaty rates at a glance

Indian income type	Domestic non-resident rate	India-Australia treaty cap	Where the relief sits
NRO interest	~30% plus surcharge and cess	15% (Article 11)	At source with TRC and Form 10F
Indian dividends	20% plus surcharge and cess	15% (Article 10)	At source or on Indian return
Royalties / technical services	10% to 20% domestic	15% (Article 12)	At source with TRC and Form 10F
Listed equity / equity MF gains	12.5% LT, 20% ST	No cap; taxable in India (Article 13)	Australian FITO, halved by Burton on discounted gains
Property gains	12.5%, no indexation	No cap; taxable in India (Article 13)	Australian FITO
NRE interest	Exempt in India	Not applicable	No Indian tax to relieve

The pattern is clean once you see it: the treaty caps the passive income rates and leaves capital gains fully Indian-taxed, with Australia providing the relief on gains through its offset.

The paperwork that actually unlocks the rates

The 15% caps are not self-executing. To get them at source you need two documents in the Indian payer's hands before the income is paid, both covering the relevant financial year.

The first is a Tax Residency Certificate issued by the Australian Taxation Office, confirming you are a tax resident of Australia for the period. The ATO issues these on request, and the certificate has to cover the financial year in which the Indian income arises. A TRC obtained after the payment date is often rejected by the Indian payer, which is the most common reason the treaty rate gets missed: people apply for the TRC at Indian tax-filing time, by which point the bank has already withheld at the domestic rate.

The second is Form 10F, which since the 2023-24 changes must be filed online through the Indian income tax portal, not on paper. It captures your name, status, nationality, Australian tax identification number, address and the period covered, and it cross-references the TRC. Many Australian NRIs need to create or activate an Indian income tax portal login, often requiring a PAN, to file it. The full step-by-step, including the beneficial-ownership declaration some payers also ask for, is in DTAA mechanics: TRC and Form 10F. The discipline that matters: file both before the first interest or dividend payment of the Indian financial year, and renew annually, because both are year-specific.

Edge cases

You are dual-resident in the year you move. In the financial year you relocate, you can be tax resident of both India and Australia under their separate domestic tests, because India's count is based on days in India and a self-assessment year, while Australia's is based on its own residency tests. The treaty's tie-breaker in Article 4 (permanent home, then centre of vital interests, then habitual abode, then nationality) decides which country treats you as resident for treaty purposes. This is not academic: it determines which country gets first claim on your worldwide income for that year. The full tie-breaker logic is in the dual-residency tie-breaker guide, and it is the section to read carefully in any year you cross the border.

The temporary-resident clock and a large sale. If you are on a 482 and a permanent residency grant is imminent, the timing of an Indian share or property sale is the highest-leverage decision in this entire guide. Sell while a temporary resident and the gain is non-assessable in Australia, leaving only the Indian tax. Sell after your PR grant and the whole gain enters the Australian net with only a FITO to soften it, and on long-term gains the Burton effect halves even that. The difference on a large gain can run to tens of thousands of dollars.

FITO and the AUD conversion. Australia requires you to convert the Indian income, the Indian tax paid and any deductions into Australian dollars at the relevant exchange rate before computing the offset. Use of the wrong conversion date is a common error that distorts the offset, and because the FITO is capped at the Australian tax on that income, an inflated conversion does not increase your credit, it just creates a discrepancy the ATO can question.

NRE interest is a non-issue. NRE deposit interest is exempt in India for a non-resident, so there is no Indian tax and no treaty rate to claim. But for an Australian permanent resident it is fully assessable in Australia as ordinary foreign income, with no Indian tax to offset, so it is taxed in full at your Australian marginal rate. The Indian exemption does not carry across the border. For a temporary resident, the same NRE interest is non-assessable in Australia, making it the most tax-efficient interest an Australian NRI on a 482 can earn.

The treaty is old, and India has read newer ones into it. The India-Australia DTAA dates from 1991 and has been amended, and India interprets some terms by reference to its model positions. The fees-for-technical-services treatment in particular is partly read through the royalty article rather than a standalone FTS article. For a salaried or investing NRI this rarely bites, but if your Indian income includes consultancy or service fees, the characterisation is debatable and worth a professional view rather than an assumption.

The closing read

The honest read is that the India-Australia treaty is generous on passive income and silent on capital gains, and most Australian NRIs get this backwards. For the common case, a permanent resident with NRO deposits and some Indian equity, three moves capture almost all the available benefit. File a TRC and Form 10F before the Indian financial year's first interest or dividend payment, every year, so you collect the 15% cap at source instead of donating the gap or waiting a year to reclaim it. Accept that your Indian capital gains will be taxed in India at the Indian rate, declare them in Australia, and claim the FITO, knowing the 50% discount and the Burton decision mean you only get credit for half the Indian tax on a discounted long-term gain. And declare your Indian income honestly in Australia, because worldwide income means worldwide.

The exception who should think hardest is the temporary resident on a 482. For you the treaty's passive-income caps are your entire global tax, so the paperwork is worth even more, and your Indian capital gains escape Australian tax entirely while the concession lasts. If a permanent residency grant is coming and you are sitting on a large Indian gain, the order of operations is the most valuable thing in this guide: realising the gain a week early can save you the entire Australian layer of tax. That is the point to get specific advice for your dates and your visa, not to rely on a blog, this one included.

Related guides

• DTAA relief for NRIs
• DTAA mechanics: TRC, Form 10F and Section 90
• The DTAA tie-breaker for dual residency
• Foreign tax credit and Form 67
• Capital gains tax for NRIs on shares and mutual funds
• Tax on NRO interest
• ITR filing for NRIs: AY 2026-27 master guide
• NRI residency and RNOR rules
• NRE, NRO and FCNR accounts
• All Taxation guides
• All Banking guides

This guide is educational and general in nature. It is not individual tax advice. Cross-border outcomes depend on your exact residency in both countries, your visa status, the income type, the dates, and the AUD-INR rate, and both the treaty and each country's domestic law can change. The Burton position on the FITO and the temporary-resident concession in particular turn on Australian law that is best confirmed with a registered Australian tax agent, alongside a qualified Indian chartered accountant for the Indian side, before you act on a large sale.