My 11year old is wanting to babysit for a seven year old for a couple hours on a Saturday evening. What are the laws and requirements in Indiana? Can the parents get into trouble for neglect if they allow this?

Indiana has no laws regarding casual babysitting. I personally would not allow my 11-year-old to babysit a 7-year-old, with both alone together in a house.

Why can't the two children be at your house with your daughter "supervising" the younger child and being paid a token amount, but under your watchful eye? That would be much safer.