The Hoosiers (11-4, 2-1 Big Ten) made 10 of 20 3-pointers to win their fifth straight game in the intrastate rivalry.
Purdue forward Carl Landry, who entered the game averaging 20 points, was held to 13 on only six field-goal attempts. Chris Kramer scored 12 points and David Teague added 11 for the Boilermakers (12-5, 1-2).
It was the largest margin of victory by either team in the series since Indiana beat Purdue 106-65 in 1991. The Hoosiers held Purdue to 41 percent shooting, forced 18 turnovers and blocked nine shots.
It was Purdue's 27th straight road loss, including three this season.
Purdue's Gordon Watt dunked to cut Indiana's lead to 45-32 early in the second half, but two free throws by Shaw, a fast break layup by Earl Calloway after a Purdue turnover and a dunk by Mike White bumped Indiana's lead to 51-32 with 11:40 remaining.
Purdue's frustration boiled over when coach Matt Painter was called for a technical foul shortly after White's dunk.
Ratliff dunked with 5:30 left to give Indiana a 76-46 lead.
At one point, Indiana, with a 28-point lead, had just four players on the floor before coach Kelvin Sampson called a timeout.
Indiana held Purdue to 28 percent shooting in the first half to take a 34-22 halftime lead. It was Purdue's lowest scoring half of the season.
Purdue didn't score for the first 4:35 of the game, and Landry didn't score a field goal until 2:56 remained in the first half.