Sakshi Arora, 22, was hit by a bullet in the forehead when Ashok Khosla fired shots into the air at a pre-wedding event on Saturday.
She died instantly, police said.
Officers arrested Mr Khosla and said the bullet that killed Ms Arora came from his revolver during the party in Hoshiarpur in the state of Punjab.
Police added that he was inebriated at the time.
His friend, Ashok Sethi, allegedly fired a double barrel rifle during the celebration.
Charanjit Arora said his daughter, who was in her final year of studying for a Masters degree, had been standing on their terrace watching the DJ play at the party next door.
He told the Hindustan Times: “Suddenly, a celebratory bullet fired during the function hit Sakshi’s forehead and she died on the spot.”
Several such incidents occur in India each year, although it is unclear how many people have been killed or injured as a result.
In November last year, an eight-year-old boy died when shots were fired at a wedding celebration.
In November 2016, a wedding guest died and three were injured when a woman started shooting while on the dancefloor.
A month later, a 25-year-old dancer was shot dead while she was performing at a wedding.