The body of Ekam Singh Dhillon was found in a suitcase kept in a BMW car near his rented house in Mohali on Sunday, police said.
Dhillon's wife was arrested and police claimed that she had admitted to murdering her husband with the help of her brother and his friend.
The woman is the niece of a former Congress MLA who lost in the recent Assembly elections.
Police have booked the woman, her mother, brother and two other relatives under various sections of IPC, including murder.
Police said the woman and her brother planned to throw the body stuffed in a suitcase in a canal.
An autorickshaw driver's help was sought by them for carrying the suitcase into the car, police said. He got suspicious when his hands were stained with blood and informed the police.