The Protection of Women from Domestic Violence Act 2005 will recognise all forms of abuse against women in the home, including physical, sexual, verbal, emotional or economic abuse.
A senior official in the ministry of women and child development said the new law meant that marital rape could now be an offence.
Previously, husbands could not be prosecuted for raping their wives unless she was under 15 years old.
Officials also say the new law focuses on empowering victims by giving them rights over their abuser's assets, rather than just penalising offenders.
"It's going to orient women to stand up for their own rights and take the necessary precautions to empower themselves," Renuka Chowdhury, minister of women and child development, said.
According to the National Crime Records Bureau, there were 155,553 crimes committed against women last year - 68,810 of which were considered to be domestic violence such as dowry deaths and cruelty by husbands and family.
But women's groups say the real figure could be ten times more as many cases go unreported with victims unwilling to speak out, fearing the shame and stigma associated with being a divorced or separated woman in traditional Indian society.
Many women are also financially dependent on their abusers and have nowhere to go if they complain to police about being mistreated, they say.
This bill will provide them with a safeguard... they are no more a thing, no more an animal and no more a shoe that you can wear any time and throw it any time"
Girija Vyas, chairwoman of the national commission for women
Officials say the new law will change this by providing for a share of the abuser's property and salary as well as medical damages for physical abuse and in certain cases, he will also have to cover the victim's legal costs.
The law also provides for the appointment of protection officers and private groups to help abused women get medical and legal aid and a safe place to stay.
A crucial clause relates to women's right to residence in shared households where the law will protect the rights of victims to secure a house or live in her married home.
Despite some of the most powerful figures in India's political history being women, such as Indira Gandhi, India's former prime minister, and her daughter-in-law, Sonia Gandhi, who is president of the governing congress-led coalition, the country remains patriarchal.
According to the ministry of home affairs, a crime is committed against a woman in India every three minutes.
The most common reported form of domestic violence is dowry-related, where women are abused and beaten and even killed by their in-laws for not bestowing enough gifts or money to their husbands' families at the time of marriage.
Many die in infamous "stove-burnings", in which in-laws set them ablaze and then say it was a kitchen accident.
Women's rights campaigners welcomed the law, which is not only applicable to married women but also to those in live-in relationships as well as women who are sisters, widows, mothers and single women.
"This bill will provide them with a safeguard and a sort of sword in their hand so that now they are no more a thing, no more an animal and no more a shoe that you can wear any time and throw it any time," said Girija Vyas, chairwoman of the national commission for women.