The Jharkhand Religious Independence Bill, was approved at a meeting of the cabinet, chaired by chief minister Raghubar Das. It states that violators will be liable for three years' imprisonment and a fine.
There have been mixed reactions to the proposed law change, with some Christian groups expressing concerns that the Christian minority in the country will be unfairly targeted.
Catholic Church leaders have maintained that they do not indulge in religious conversions by force, fraud and allurement.
Cardinal Telesphore Toppo told Times of India: "Over the decades, we have been running many schools and colleges, healthcare facilities and hospitals all over the state, serving the poor, the downtrodden and the forgotten.
"None of the millions of people whom we have served have been converted to Christianity."
Ram Gidoomal, Chairman of South Asian Concern told Premier that he has enjoyed a tradition of a range of religions coming from a Hindu family, being brought up a Sikh and attending a Muslim School.
Speaking during News Hour he said: "I've enjoyed that freedom and I've chosen to follow Christ and that is my religion, that is my freedom, my privilege.
"I think this is outrageous. I don't think it is right that a state or any government should be thinking in terms of passing legislation about conversion. It is a human right. It is something that is fundamental to every human being on the planet."
Opposition party Jharkhand Mukti Morcha (JMM) also condemned the cabinet decision.
JMM general secretary Supriyo Bhattacharya told Times of India: "Existing laws are enough to prevent any forcible conversion. This bill has a more sinister design - through it, BJP (Bharatiya Janata Party) wants to create a divide within the tribal community."
The BJP party has stepped up efforts to check religious conversion, specifically of tribals - who make up roughly 27 per cent of the state's total population - since it formed a government in 2014.
In a statement welcoming the move, BJP wrote: "The innocent people of Jharkhand have been forcibly converted for a long time.
"Such religious conversions are eroding the society's culture and core values. This is a positive effort."
The bill provides for tougher action on forced conversions of minor girls and women from the scheduled tribes.
BJP cabinet coordination secretary, Surendra Singh Meena, told reporters that in this case, a "perpetrator would face jail term of up to four years and penalty of Rs 1 lakh (roughly £1184) or both".
Figures from the 2011 census reveal 4 per cent of the state's population of 32 million are Christian and 14.5 per cent are Muslim.
The census report said while the state's Hindu population grew by 21 per cent in the last 10 years, the Christian population grew by 30 per cent and Muslims by 28 per cent.
Listen to Ram Gidoomal, Chairman of South Asian Concern, speaking with Premier's Tola Mbakwe: