Guru Dutt was born to Shivashankar Rao Padukone and Vasanthi Padukone and they belonged to the Chitrapur Saraswats origin. Their ancestral home was at Panambur, a village in South Kanara district of Karnataka. His father was initially a headmaster, and then changed his profession as a bank employee. His mother Vasanthi was at first a housewife, but later taught in a school, offered private tuition and also wrote short stories and took effort to translate Bengali novels into Kannada to earn some money. Guru Dutt's mother was only 16 years of age when he was born. Guru Dutt had a tough childhood with financial difficulties. Due to this constant botheration of expenses, his parents also had a strained relationship and as a result Guru Dutt suffered. As a child he experienced several violent situations in his home itself. The hostility from his maternal uncle's family, a terrifying encounter with his insane maternal adopted uncle, and the death of his seven-month old brother Shashidhar made him numb at the depths of the young heart.
Vasanth Kumar was the first name given to Guru Dutt at birth at the suggestion of his mother's elder brother, but after a childhood accident, he was renamed Guru Dutt, since his relatives felt the later name to be a more auspicious. Guru Dutt had three younger brothers, Atmaram, Devidas and Vijay and a younger sister, Lalitha. The Indian film director, Kalpana Lajmi happens to be his sister's daughter. Guru Dutt loved to spend his time with his mother's cousin, Balakrishna B. Benegal (known to the family as Bakutmama) who was a painter of cinema posters. The Indian film director, Shyam Benegal, is the son of Sridhar B. Benegal, who was Balakrishna's younger brother.
At 14 years of age Guru Dutt would use his fingers to create images on a wall lit up by the flickering light of their grandmother's diya, while she performed the evening arathi. Even without formal training Guru Dutt could create inspired movements as he did when he persuaded his uncle, Benegal, to photograph him performing a snake dance, based on only a painting by the his uncle. The snake dance was later performed at a communal gathering of Saraswat Brahmins at Calcutta for which Guru Dutt was even given a cash prize of 5 Rupees. Guru Dutt was a good student, but never went to college, mainly because of financial troubles at home. Instead, he voluntarily joined the performing arts troupe of Uday Shankar, the older brother of the better-known Ravi Shankar.
The Uday Shankar India Culture Center at Almora was a renowned institution teaching dance, drama, and music. This center aimed at combining the best of the Gurukula system with a modern Arts University, and tried to train potential students, at home in many disciplines. Guru Dutt joined the center at age 16 in 1941 on a five-year scholarship of Rs. 75 annually that meant a lot of money then and studied at Almora until 1944, when the advancing World War II forced the closing of the center.
Guru Dutt's father had his job posting as a headmaster at Panambur and later changed the domain to a bank employee at Bangalore. He started to work as an administrative clerk at the Burmah Shell Company and resided at Bhawanipore near Calcutta, where Guru Dutt completed his schooling. Hence, Guru Dutt was able to speak fluent Bengali, and carried a distinct mark of Bengali culture in his work. Later, when he moved to Mumbai in the 1940s, he left alone the Shivashankar Padukone part of his name, and became known simply as Guru Dutt. Because Dutt is a very common Bengali title, many people assumed him to be a Bengali.