The attack happened after family members gathered late Saturday at one of their homes in Thane, some 32 kilometers (20 miles) from Mumbai, for a family function, police said.
"The attacker, Hasnin Anwar Warekar, hung himself after slitting the throats of all other family members including his parents," a Thane police spokesman, Gajanan Laxman Kabdule, told AFP.
The sole survivor of the attack -- Warekar's sister -- was taken to hospital after neighbors heard her screaming for help after midnight and alerted police.
"We still haven't been able to speak with the attacker's 21-year-old sister, the lone survivor of the attack, who is in deep trauma at a city hospital," Kabdule said.
Warekar attacked his family after apparently lacing their food with a sedative, according to several local media reports.
But the Indian Express newspaper said the chartered accountant stabbed his victims after they went to bed, having all decided to spend the night at the house.
"Prima facie evidence suggests that the accused bolted all the doors of the house and murdered his family while they were asleep with a knife that we found near his body," Ashutosh Dumbre, joint commissioner of Thane police, was quoted saying.
Kabdule said he could not confirm whether the victims had been sedated, saying investigators were awaiting medical test results.
Television footage showed men lifting bodies wrapped in sheets in to the back of an ambulance, as crowds gathered outside the white-walled home.
Kabdule said details of the attack "are still sketchy" along with the motive.
According to the Press Trust of India news agency, a property dispute was behind the killings, but Dumbre said initial investigations have so far found no trigger for such an "extreme step".
"In our inquiry so far, no one has yet been able to give the reason for this," Dumbre told the ABP news channel.
"He worked with a private company in Mumbai. There were no known financial troubles or disputes and now we are hoping that the lone survivor can tell us something about the trigger," he said.