Half a dollar a day is "adequate" for an Indian villager to spend on food, education and health, the country's main planning body has said.
Critics say that the amount fixed by the Planning Commission is extremely low and aimed at "artificially" reducing the number of poor who are entitled to state benefits.
There are various estimates of the exact number of poor in India.
Officially, 37% of India's 1.21bn people live below the poverty line.
But one estimate suggests the true figure could be as high as 77%.
The Planning Commission has told India's Supreme Court that an individual income of 25 rupees (52 cents) a day would help provide for adequate "private expenditure on food, education and health" in the villages.
In the cities, it said, individual earnings of 32 rupees a day (66 cents) were adequate.
The Planning Commission was responding to a direction from the court to update its poverty line figures to reflect rising prices.
India has been struggling to contain inflation which is at a 13-month high of 9.78%.
Many experts have said the income limit to define the poor was too low.
"This extremely low estimated expenditure is aimed at artificially reducing the number of persons below the poverty line and thus reduce government expenditure on the poor," well-known social activist Aruna Roy told The Hindu newspaper.
The Planning Commission also told the court that 360 million Indians are now being supplied with subsidised food and cooking fuel through the network of state-owned shops.
A World Bank report in May said attempts by the Indian government to combat poverty were not working.
It said aid programmes were beset by corruption, bad administration and under-payments.