The India-Australia Tax Treaty: Residence, Superannuation and Relief

Two tax systems that do not line up

The agreement between Australia and India was signed in Canberra on 25 July 1991 and entered into force on 30 December 1991. It has been amended once by protocol, signed in New Delhi on 16 December 2011 and in force from 2 April 2013, and it is a Covered Tax Agreement modified by the Multilateral Instrument — a modification the Australian Taxation Office dates from 1 January 2020 for withholding taxes and from income years starting on or after 1 April 2020 for everything else.

None of that changes the first practical problem, which is arithmetic rather than law. India's tax year runs from 1 April to 31 March; Australia's income year runs from 1 July to 30 June. Any income both countries tax is reported in periods that never coincide, and every credit claim has to be rebuilt across that seam.

The treaty does not solve the mismatch. It allocates taxing rights and then tells each country to relieve the resulting double charge under its own domestic credit machinery. The friction lives in the machinery.

The tie-breaker is an unusually short ladder

Article 4(1) starts where most treaties start: you are a resident of a state if you are a resident there under its own tax law, and you are not treated as a resident if you are liable to tax there only on income from sources in that state.

Where both countries claim you, Article 4(2) breaks the tie — but with only two rungs, not the four most readers expect:

There is no separate habitual abode step and no nationality step. Instead, the article makes citizenship and habitual abode factors in weighing the centre of vital interests. Under the more common cascade, someone with homes in both countries and genuinely balanced ties eventually falls to a mechanical nationality test. Here there is no mechanical fallback at all: the whole question collapses into a single evaluative judgement about where your life sits.

For anyone with a spouse in one country and work in the other, that judgement is where the case is won or lost, and it is decided on facts you can document — where the family lives, where the children are schooled, where the professional base is — rather than on a rule you can satisfy by counting. Our guide to the India residential status test covers the Indian domestic day-count limb that has to be satisfied before any of this becomes relevant.

For entities, Article 4(3) points to place of effective management, though dual-resident non-individuals in MLI-modified treaties are now generally routed through a competent authority determination instead.

Indian property income stays Indian

Article 6 lets income from real property be taxed in the state where the property is situated, and expressly extends to income from the direct use, letting or use in any other form of that property. India therefore keeps an unrestricted taxing right over rent from Indian property no matter how long you have lived in Australia.

Australia then taxes the same rent again, because it taxes its residents on worldwide income, and removes the overlap by credit. Two things routinely go wrong in that sequence.

The first is measurement. India computes house property income from an annual value reduced by statutory deductions and interest; Australia computes rental income from actual receipts less actual deductions on Australian rules. The two figures differ, sometimes materially — and the Australian credit is limited by reference to the Australian measure, not the Indian one.

The second is withholding. Rent paid to a non-resident landlord is subject to Indian tax deduction at source under the rules for payments to non-residents, which are not the rules that apply when the landlord is resident. Tenants and agents frequently apply the wrong regime. The NRI property rental income and TDS guide sets out how that is administered.

Gains follow a different logic again. Article 13 permits India to tax gains on shares in Indian companies and on interests in property-rich companies, and paragraph 6 expressly preserves each country's domestic law for gains outside the listed categories. This is not a treaty that clears capital gains out of the source country.

Business profits and the permanent establishment threshold

The 2011 protocol rewrote two provisions that matter to anyone running a business across the two countries.

It replaced Article 7(1) so that where a permanent establishment exists, only the profits attributable to that establishment may be taxed in the other state. The original text also swept in sales and activities of a similar kind carried on outside the establishment — a force-of-attraction rule that could pull unrelated profits into the source-country net. That is gone.

It also replaced the services limb in Article 5(3). An enterprise is now deemed to have a permanent establishment where it furnishes services, including consultancy services, through employees or other personnel for periods aggregating more than 183 days in any twelve-month period for the same or connected project. Natural resource activities cross the line at more than 90 days, and the operation of substantial equipment at more than 183 days. A building site or construction, installation or assembly project creates a permanent establishment under Article 5(2)(k) where it lasts more than six months.

Separately, and outside the treaty, Australia amended its domestic law under the Australia-India Economic Cooperation and Trade Agreement to stop taxing certain payments to Indian residents for technical services delivered remotely — that is, not through an Australian permanent establishment — for income years commencing on or after 29 December 2022. Payments for onshore services delivered through an Australian permanent establishment continue to be taxed, so composite onshore-offshore contracts need splitting rather than treating as one supply.

Withholding caps sit alongside all this: dividends and interest are each capped at 15 per cent in the source state, and royalties at 15 per cent generally, with a lower 10 per cent ceiling for equipment-related categories.

Superannuation and the pension article

Article 18 is short and consequential. Pensions — other than government service pensions under Article 19 — and annuities paid to a resident of one state are taxable only in that state. There is no shared right and no source-country claim.

An Australian superannuation income stream paid to someone resident in India is therefore taxable only in India, even where Australia would have imposed no tax on the same payment. The treaty does not import Australia's domestic treatment; it hands the whole charge to the country of residence. For someone who returned expecting a tax-free retirement income that is an expensive surprise, and it interacts directly with the RNOR window that shelters foreign income for a limited run of years after return.

A lump sum is a different question. Article 18(2) defines an annuity as a stated sum payable periodically at stated times under an obligation to pay in return for adequate and full consideration. A single withdrawal is neither a pension nor an annuity on that wording, so it falls outside Article 18 and has to be analysed under the remaining articles and both domestic laws.

Where a temporary resident leaves Australia permanently, the departing Australia superannuation payment is taxed by withholding at the point of payment: nil on the tax-free component, 35 per cent on the taxed element of the taxable component, 45 per cent on the untaxed element, and 65 per cent where working holiday maker contributions are involved. That is a final Australian tax deducted before the money leaves, and it is deducted whether or not India also taxes the receipt.

India does offer a deferral election for income accruing in certain foreign retirement accounts, but it operates only for accounts maintained in countries the CBDT has notified for that purpose. Confirm whether Australia is on the current notified list before assuming superannuation qualifies.

Foreign income tax offsets on the Australian side

Article 24(1)(a) obliges Australia to credit Indian tax paid in accordance with the agreement — but "subject to the provisions of the law of Australia from time to time in force". That law is Division 770 of the Income Tax Assessment Act 1997, and its limits are where relief is actually lost.

The ATO's rule has three parts. If your offset claim is A$1,000 or less, you record the foreign tax paid and stop. If it exceeds A$1,000, you must calculate an offset limit: your Australian tax payable, less the Australian tax you would have paid with the foreign-taxed and foreign-sourced income and its related deductions disregarded. Anything above that limit is not refunded and cannot be carried forward to a later income year.

The limit bites hardest exactly where you would expect. Indian tax on Indian rent, computed on Indian deduction rules, can exceed the Australian tax on the same rent computed on Australian rules — and the excess simply disappears. Where foreign tax is paid after the Australian year in which the income was assessed, the ATO's guidance allows the earlier assessment to be amended to claim the offset, which is the usual route through the tax-year mismatch.

India's mirror provision, Article 24(4)(a), caps its credit at the proportion of Indian tax that the Australian-sourced income bears to total income chargeable in India.

What each authority actually asks you to prove

India gates treaty relief at the door. Section 159 of the Income-tax Act 2025 carries forward the familiar structure: section 159(4) applies the domestic Act only to the extent it is more beneficial than the agreement, and section 159(6) makes the general anti-avoidance chapter apply whether or not that is beneficial. Section 159(8) then makes relief available to a non-resident only where a residence certificate has been obtained from the government of the country of residence and the prescribed further information is supplied — now on Form 41, the successor to Form 10F. Indian residents needing the reciprocal document apply in Form 42 and receive the certificate in Form 43.

On the Australian side the ATO issues a certificate of residency confirming that, for a stated period, you were an Australian resident for tax purposes, were not a temporary resident, and were liable to Australian tax on worldwide income. That framing matters: a person on a temporary visa whose foreign income is largely outside the Australian charge does not fit the description, which can leave the Indian documentary condition hard to satisfy in the ordinary way. Where you consider yourself resident in both countries, the ATO asks for an early engagement advice request before a certificate is considered.

If the two administrations still reach inconsistent answers, Article 25 provides a mutual agreement procedure, with a case to be presented within three years of the first notification of the action complained of. More detail on the certificate process sits in our guide to DTAA relief and the Tax Residency Certificate.

Compliance caveat

This guide summarises the general structure of the 1991 India-Australia agreement as amended by the 2011 protocol and modified by the Multilateral Instrument, together with the Australian and Indian domestic mechanics that sit around it. It does not address employment income allocation in detail, capital gains planning, trusts and partnerships, transfer pricing, the Indian foreign asset disclosure regime, FEMA residence — which is decided separately from income-tax residence and can differ — or Australian state taxes. Withholding caps, offset thresholds and form numbers change with each Finance Act and each Australian legislative amendment; confirm the current position before relying on any figure here. This is a simplified guide, not tax advice. Global Investments is not authorised by the Financial Conduct Authority or by the Securities and Exchange Board of India. Confirm your position with qualified advisers in both India and Australia before filing or acting.

How Global Investments can help

Most India-Australia problems we see are not disputes about what the treaty says. They are failures of sequencing: a residence question settled after the year closed rather than before it, an Indian tax paid in a period that no longer maps to an amendable Australian assessment, a superannuation decision taken on the Australian treatment alone. Our advisers work with clients moving in either direction to establish which country the tie-breaker points to and on what evidence, to model how Indian and Australian measures of the same income diverge before the offset limit is calculated, and to line up the certificates each administration requires while they can still be obtained. Where superannuation, an Indian property or an operating business is involved, we coordinate with specialists on both sides so the two answers fit together rather than being built in isolation.