"Chopping of (the) hand of (an) Indian lady - we are very much disturbed over the brutal manner in which (this) Indian lady has been treated in Saudi Arabia," Indian's foreign minister, Sushma Swaraj said in a message posted on Twitter.
A spokesman for the Indian foreign ministry confirmed that a formal complaint is being filed at the the Saudi foreign ministry.
The Indian government is also reportedly considering a total ban on the recruitment of housemaids by Saudi Arabia.
Kasthuri Munirathinam said her right arm was cut off when she was caught trying to flee the house.
She is recovering in hospital in Riyadh.
The incident comes weeks after a Saudi diplomat based in New Delhi left the country after being accused of rape.
Munirathinam's family in the southern state of Tamil Nadu said the employer had been unhappy after Munirathinam complained of harrassment and abuse during her three months on the job.
"When she tried to escape harassment and torture, her right hand was chopped off by the woman employer," her sister, S Vijayakumari, told the Press Trust of India (PTI) news agency.
Foreign ministry spokesman Vikas Swarup said every effort was being expended to get Munirathinam home.
"We are in touch with the woman, hospital and the local police authorities. She will get all possible legal and other help from the embassy," Swarup told AFP news agency.
Hundreds of thousands of men and women from India work in Arab states as domestic servants and labourers.
