By Saurabh Garg, founder·12 min read·Published 2026-06-11

Australian Tax on Rental Income From India

If you are an Australian tax resident, the rent from your flat in Bangalore or Hyderabad must go on your Australian tax return, and you claim a credit for the Indian tax already paid. India taxes the rent first, under its own domestic rules. Australia then taxes the same rent again, as part of your worldwide income, and gives you a Foreign Income Tax Offset for the Indian tax so you are not paying twice on one rupee. This guide covers the Australian side. For how India taxes the rent itself, TDS deducted by your tenant, and the standard deduction, see income tax for NRIs on rental income in India.

Worldwide income: the ATO does not care where the property sits

The Australian Taxation Office states it plainly: "As an Australian resident for tax purposes, you must declare income you earn anywhere in the world in your Australian tax return." This is called worldwide income, and it names rental income from real estate specifically, alongside interest, dividends and capital gains on overseas assets (ATO, Australian resident for tax purposes: foreign and worldwide income).

There is no threshold and no exemption for a single flat back home. Whether the rent is ₹25,000 a month from a Whitefield apartment or ₹80,000 from a Gachibowli villa, it counts. Being "NRI" from India's standpoint has no bearing on this obligation. What matters is your Australian tax residency status, covered below.

The ATO also runs data-matching with foreign tax authorities and financial institutions through information-exchange agreements, and warns that residents with financial accounts overseas can face penalties and interest for undeclared income (ATO, same page, "Audit and verification checks"). An Indian NRO account receiving rent, and the property records tied to it, sit inside that net.

How to declare it: exchange rates and the return

You report the rental income on your Australian tax return using the rental property schedule. Two mechanics matter.

Currency conversion. The ATO requires you to "convert all foreign income, deductions and tax offsets to Australian dollars in your tax return." You can use either the exchange rate prevailing at the specific time each amount was received or paid, under the ATO's translation (conversion) rules, or an average exchange rate published monthly by the ATO (ATO, Australian resident for tax purposes: foreign and worldwide income, "Converting foreign income to Australian dollars"). Pick one convention and apply it consistently across the year rather than mixing spot and average rates, since the ATO can ask you to substantiate the figures.

Year mismatch. India's tax year runs April to March. Australia's runs July to June. The ATO acknowledges this directly: "most countries do not have an income year ending on 30 June," and expects you to work out which Australian income year each amount of rent and each amount of Indian tax paid belongs to, then apportion accordingly (same page, "Apportioning foreign income across multiple years"). A tenant's rent paid in February, or Indian tax settled after India's July return deadline, can land in a different Australian financial year than you expect. Keep a running ledger by month, not just an annual total from your Indian CA.

Deductible expenses: Australia does not mirror India's flat 30%

This is where owners with an Indian CA and an Australian accountant talk past each other, because the two countries do not compute the deduction the same way.

India allows a flat 30% standard deduction against rental income under Section 22(1)(a) of the Income-tax Act, 2025 (formerly Section 24(a)), no bills required. See how India taxes NRI rental income for the full mechanics.

Australia has no equivalent flat percentage. You claim actual expenses you incurred, each substantiated. The ATO's rental expenses guidance lists what is deductible in the year you incur it, including: interest on a loan used to buy or improve the property, property agent's fees and commission, repairs and maintenance connected to wear and tear from renting, council rates, land tax, insurance, advertising for tenants, and legal expenses (ATO, Rental expenses you can claim now). Capital items over $300, such as a replacement water heater or air-conditioning unit, are depreciated rather than claimed immediately.

Beyond the running expenses, Australian tax law recognises two further deduction categories for a rental property that India's Section 22 flat deduction does not separately track:

The practical consequence: your Indian tax return shows one net figure (rent minus a flat 30%), and your Australian return shows a different net figure (rent minus itemised actual expenses, including interest and depreciation India does not allow at all against this income the same way). The two "net rental income" numbers will not match, and they are not supposed to.

The Foreign Income Tax Offset: how the credit works

The Foreign Income Tax Offset, FITO, is the mechanism that stops the same rent being taxed twice. The ATO describes it as providing "relief from paying double tax on your foreign and worldwide income" (ATO, Claiming a foreign income tax offset).

To claim it, you must have actually paid, or be deemed to have paid, foreign income tax on the amount, and that same income must be included in your Australian assessable income. You need records proving the Indian tax was paid (same source, "Eligibility for the foreign income tax offset" and "Tax paid overseas").

The $1,000 threshold. If your total FITO claim across all foreign income for the year is $1,000 or less, you simply record the amount of foreign tax paid. Above $1,000, you must work out your FITO limit: broadly, the difference between your actual Australian tax liability and what it would have been if the foreign income and related deductions were left out (ATO, Claiming a foreign income tax offset, "Calculate the foreign income tax offset"; ATO, Guide to foreign income tax offset rules, "Calculate your FITO or offset limit"). Foreign tax paid in excess of that limit is not refunded and cannot be carried forward.

Applying the offset. Once calculated, the offset first reduces your income tax payable, then any remaining amount reduces Medicare levy, then Medicare levy surcharge, in that order (ATO, Claiming a foreign income tax offset, "Applying FITO against Medicare levy and surcharge").

What counts as evidence. The ATO requires proof the foreign tax was actually paid, not merely deducted or assessed. For rent from India, this generally means the Indian tax paid on the rental income, evidenced by your Indian income tax return and the corresponding tax paid or TDS certificate, not just the fact that a tenant withheld tax under Section 195.

The DTA article and what it actually does

The Australia-India Double Taxation Agreement, at Article 6, gives India the first right to tax income from real property situated in India, using India's own definition of immovable property. This mirrors the pattern in most of Australia's tax treaties: the source country taxes real estate income first, under its domestic law.

The DTA does not cap or reduce the Indian tax rate on rental income, and it does not exempt an Australian resident from declaring the same rent in Australia. What the treaty framework does is authorise the credit mechanism, the FITO, so that India's prior taxing right does not result in the rent being taxed in full twice. In practice this means: file in India first (return, TDS reconciliation, any refund), then bring the net Indian tax paid into your Australian return as the offset.

Are you even an Australian tax resident? "NRI" does not answer that

This is the step people skip, and it changes everything above. An Australian tax resident is taxed on worldwide income. A foreign resident for Australian tax purposes is taxed only on Australian-sourced income, meaning the Indian rent would not go on an Australian return at all. Whether you are one or the other is an Australian legal question, separate from your Indian NRI status.

The ATO applies four tests, and meeting any one makes you an Australian tax resident: the resides test, the domicile test, the 183-day test, and the superannuation test.

The resides test is the primary one and turns on ordinary meaning: "to dwell permanently, or for a considerable time, to have one's settled or usual abode, to live, in or at a particular place" (ATO, Residency: the resides test, citing the Shorter Oxford Dictionary). The ATO weighs your physical presence, intention, family and business ties, and where you organise your financial affairs, "no single factor is likely to be decisive" (same page). It gives a concrete example: someone who says they do not intend to stay, but has opened local bank accounts and signed a 12-month lease, is likely to be found a resident anyway, because behaviour outweighs stated intention.

If you moved to Australia on a long-term visa, built a life there, and still own a rental flat in Hyderabad you inherited or bought before emigrating, you are very likely an Australian tax resident under this test, regardless of holding NRI status on the Indian side. The two labels answer different questions and can both be true at once. If your circumstances are genuinely borderline, this determination needs a qualified Australian tax adviser, not a general guide.

Where this goes wrong

What 66 MG Road does on the India side

We do not file Australian tax returns. What we do is make sure the Indian half of this equation is clean: rent collected into your NRO account, the tenant's Section 195 TDS tracked and certified, the Indian ITR-2 filed on time with the correct income and deductions, and a documentation file, TDS certificates, challans, the filed return, handed to your Australian accountant in a form they can actually use for the FITO claim. Teams in Bangalore, Hyderabad, Mumbai, Pune, Chennai, and Gurgaon. See tax and repatriation services.

Saurabh Garg, founder, 66 MG Road

FAQ

Do I have to declare rent from my Indian property on my Australian tax return? Yes, if you are an Australian tax resident. The ATO taxes residents on worldwide income, and rental income from real estate is named specifically in its foreign and worldwide income guidance.

Will I be taxed twice on the same rent, once in India and once in Australia? Not if you claim the Foreign Income Tax Offset correctly. India taxes the rent first under its domestic rules. Australia taxes the same rent as part of worldwide income, then the FITO credits the Indian tax paid against the Australian tax on that income.

Is there a limit on how much foreign tax I can claim back through FITO? Claims up to $1,000 need no separate limit calculation. Above $1,000, you must work out your FITO limit, broadly the difference between your Australian tax with and without the foreign income included. Tax paid in excess of that limit is lost, not refunded or carried forward.

Can I use India's 30% standard deduction on my Australian return? No. Australia does not have a flat percentage deduction for rental property. You claim actual, substantiated expenses (interest, agent fees, repairs, council rates) plus, where applicable, Division 43 capital works and Division 40 depreciation. Expect your Indian and Australian net rental figures to differ.

I call myself NRI in India. Does that mean Australia won't tax my Indian rent? No. Indian NRI status and Australian tax residency are separate determinations. The ATO's resides, domicile, 183-day, and superannuation tests decide whether you are an Australian tax resident, and any one of them being met brings your worldwide income, including Indian rent, into the Australian tax net.

What exchange rate should I use to convert the rent into Australian dollars? Either the exchange rate at the specific time each amount was received or paid, under the ATO's translation rules, or the ATO's published monthly average rate. Apply one method consistently for the year.

Does the Australia-India tax treaty reduce the Indian tax rate on my rent? No. Article 6 of the treaty confirms India's right to tax income from property situated in India, under India's own law. The treaty's practical value for a landlord is enabling the FITO credit mechanism on the Australian side, not a rate discount on either side.

Sources

Information on this page is as on 2026-06-11. Rules, rates, deadlines and government portals change without notice, so verify against the official source before you act. This page is for information only. It is not tax or legal advice, and it is not a substitute for a qualified adviser who knows your position.