The court's decision, seen as a watershed moment for the Indian military, would mean that women can extend their short service roles in noncombat support units such as education, law and logistics until they want to retire and rise to the rank of Colonel, based on merit.
Currently, female officers can serve for only 10 to 14 years in the army.
"This is a historic decision and a significant day for not only those who are serving in the army but for also those who are desirers of joining forces," said Lt. Col. Anjali Bisht.
The Supreme Court's decision, however, does not mean that female officers will serve in army combat units such as the infantry, artillery or armored corps.
Monday's decision comes days after the government told the court that women were not suitable for commanding posts in the army, saying male troops were not prepared yet to accept female officers. It also said that male and female officers could not be treated equally when it came to postings because the "physical capacity of women officers remains a challenge for command of units."
The court said in its order that such arguments were against the concept of equality.
Previously, former army Chief of Staff and current Chief of Defense Staff Gen. Bipin Rawat raked up a controversy when he said in an interview with a news channel that women were not ready for combat roles because they were responsible for raising children and would accuse male officers of peeping into their quarters.
"She will say somebody is peeping, so we will have to give a sheet around her," Rawat had told CNN-News18.
The petitioners in the case demanding equal rights for female officers welcomed the court's decision.
"This is very, very significant," said Meenakshi Lekhi, a lawyer. "A denial of particular progression was something which is inherently unequal and unjust."