Labuschagne scored 31 runs with a bit of fortune in Australia's first innings.
Australia enjoyed their best day of the Test series so far, on Day 1 of the Indore Test, despite losing a crucial toss on a tricky dry pitch as India opted to bat first after taking a 2-0 lead in the series.
Without their regular captain Pat Cummins who flew home to be with his ill mother, the visitors brought in Mitchell Starc as a straightforward replacement, and Cameron Green replaced Matthew Renshaw.
Australia's spinners made full use of the moisture in the pitch to wreak havoc as India were cleaned up for 109. Matthew Kuhnemann took 5/16, his maiden five-wicket haul, while Nathan Lyon also grabbed 3/35. Replying well with the bat, Usman Khawaja struck 60 as Australia ended the day at 156/4 - with a lead of 47 runs.
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Marnus Labuschagne also battled hard and with an element of fortune scored 31 crucial runs in a partnership of 96 for the second wicket with Khawaja. He should have been out for 0 after being bowled off his inside-edge by Ravindra Jadeja, but the latter had overstepped the line.
Then soon after, Labuschagne survived a close lbw shout off R Ashwin, as India decided not to take the review which later indicated the onfield decision of not out would have been reversed.
Eventually, Jadeja had his number for the fourth time in five innings in the ongoing series, as he once again bowled Labuschagne with one that kept lower than the batter's expectations.
A distraught Labuschagne was later seen shaking his head while checking the replay of his dismissal.