Australia lost two wickets, including that of skipper Steve Smith, in the morning session and were staring a comprehensive defeat full in the face at lunch on the final day of the third test against India on Monday.

Australia were reeling on 83 for four at the break, still 69 runs in arrears, and will need an extraordinary batting effort to prevent India from going 2-1 up in the four-test series.

Shaun Marsh will resume on 15 alongside Peter Handscomb, who had scored four runs.

Buoyant after making 603 in their first innings and with Ravindra Jadeja having taken a couple of late wickets the previous evening, India predictably came out hard at the Australians.

Overnight batsmen Steve Smith and Matt Renshaw, resuming on 23 for two and needing 129 more runs just to make India bat again, frustrated the hosts for about 21 overs before falling in quick succession.

Left-arm spinner Jadeja relentlessly attacked the rough outside Renshaw's off-stump, while Ishant Sharma bowled to Smith with a seven-two off-side field.

Pumped up after an altercation with Renshaw, Sharma earned the breakthrough for India when he trapped the opener leg-before for 15 with a fuller delivery.

A bigger blow awaited Australia in the next over when Jadeja, who already has eight wickets in the match to go with an unbeaten fifty with the bat, spun one past Smith's advancing pad and uprooted the off-stump.

The Australian captain had scored an unbeaten 178 in the first innings but fell for 21 in the second.

Off-spinner Ravichandran Ashwin troubled Marsh in the only over he bowled before lunch, giving an idea of the enormity of the task lying ahead for the tourists over the final two sessions.

Dharamsala hosts the final match of the series from Saturday.