In developing countries, cities play a significant role in stimulating economic growth, employment opportunities and transformative change. At the same time, uneven urbanisation-driven by poverty and different levels of socioeconomic development-often contribute to wider income disparities. Issues of inequality in India have received significant attention from academia, policies and practice. Yet, there is a dearth of comprehensive understanding on the relations between inequality in urban population distribution and income inequality in India. The main objective of this study was to analyse the impact of inequality in population concentration from different classes of cities/towns on urban income inequality and the total state-level (urban + rural) income inequality in India between 1991 and 2011. This study used unit-level data on Consumer Expenditures' from the National Sample Survey and the most recently updated 35 states. The findings indicate that the inequality in urban population concentration between different classes of cities and towns exerts a significant influence on urban income inequality and total state-level income inequality in India. Additionally, the inequality in concentration of urban population in large cities increases state-level inequality, whereas in small towns, it decreases. State-level control variables such as infant mortality, literacy rate, and per-capita net state domestic product exhibit a positive and statistically significant effect on both urban and total inequality in India. The results of this research suggest that the attainment of inclusive and progressive spatial development in India necessitates the pursuit of a more equitable process of urbanisation, characterised by a gradual socio-spatial transformation in smaller towns. This serves as a guide for other developing nations seeking to achieve sustainable and equitable urbanisation.