Pointing to a lady in the photograph, Shaloo said, “Her son’s father is the son-in-law of my mother.” How is Shaloo related to the lady ?

Lady’s son’s father is lady’s husband. So, the lady’s husband is the son-in-law of Shaloo’s mother,

i.e. the lady is the daughter of Shaloo’s mother. Thus, Shaloo is the lady’s sister.