Rising returns to education have increased wage inequality in many developing countries, but their impact on inequality between households is less clear. This study asks how education contributed to household inequality in India during the period 1993-2004, using a regression based decomposition method. We find that rising returns to education of employees did not increase household inequality, because many household heads are self-employed. Instead, rising inequality in education contributed to higher inequality, partly because fertility declined more slowly among illiterates. These new insights into the education-inequality relationship in India underline the importance of household level analysis to complement earnings inequality research.