Indonesian rescue authorities say 15 asylum seekers died when their boat sank off the south coast of west Java.
Speaking on the basis of information provided by local police, rescue authorities say 15 bodies and 25 survivors have been found.
The boat sank off a remote area of coast off the Cianjur region of west Java.
The survivors have been taken to a local Islamic school or pesantren. The dead bodies were to be taken to a local health centre but it is too small to house them.
The tragedy comes as a diplomatic row continues to simmer over Australia's plans to turn back asylum boats.
Meanwhile, Australian authorities are attempting to return a second group of asylum seekers to Indonesia after rescuing them at sea.
The Australian Customs ship, ACV Triton, is attempting to get permission to enter Indonesian waters to offload 31 asylum seekers rescued overnight.
If permission is granted it will be the second time since yesterday that Australian rescue authorities have returned asylum seekers to Indonesia.
The Triton, is waiting off the coast of Timor for permission to enter Indonesian waters.
The Australian Maritime Safety Authority (AMSA) told its Indonesian equivalent Basarnas the "preference is for a transfer at sea" to Indonesian authorities.
The earlier group of 44 asylum seekers and two crew members were on a boat which issued a distress call 40 nautical miles off Java on Thursday morning.
Suyatno, the head of operations at the Jakarta office of Indonesia's rescue agency Basarnas, says his agency did not have the capability to reach the boat.
The Australian Navy intercepted the vessel and then advised Basarnas that it would drop the asylum seekers off.
In the early hours of Friday morning an Indonesian rescue crew met a Navy ship off the coast of Java and the asylum seekers were handed over.
It is understood the handover took place just outside the 12 nautical mile limit of Indonesian territorial waters.
Suyatno says he does not know why Australia did not take the asylum seekers to Christmas Island.
One of the boat's crew members, Azam, says the boat was not broken, despite passengers calling Australia to be rescued.
He says the Navy set fire to the boat at sea.
Interceptions of this kind, where Australian authorities hand asylum seekers back to Indonesian authorities after being asked to assist in their rescue, only happened once during the six years of the last Labor government.
On all other occasions when asylum seekers have been intercepted by Australian authorities, they have been taken to Christmas Island.
The ABC's Parliament House bureau chief Greg Jennett said earlier today that while the first rescue did not strictly qualify as a boat "turnback", it hinted at a new and tougher approach by Australia.
He says it could also establish a precedent with Indonesia whereby any call for Australian help with rescues or intercepts comes with a condition that the passengers will be handed back.
But the public may never know if such protocols exist.
The Government is sticking by its policy of not commenting on the operational details of any intercepts at sea under Operation Sovereign Borders.
The next opportunity to question the Immigration Minister and his Commander will be at their scheduled briefing, due next Monday.