Both Smith and Warner were banned for 12 months by Cricket Australia on Wednesday for their roles in the ball-tampering scandal in Cape Town, having uncovered a web of lies told by the players after they were caught.
Australian opening batsman Cameron Bancroft was also banned for nine months following the scandal, which has outraged fans, jolted the sponsors and prompted CA to send the trio home from South Africa.
The IPL’s decision represents a significant loss of income after the Rajasthan Royals and Sunrisers Hyderabad had paid $1.84-million respectively for their services.
The two franchises will be allowed to find replacements before the IPL season begins on April 7.