The IAF has no official word yet on how many personnel were aboard the aircraft.
The crash of the four-engine US made aircraft has baffled experienced pilots, given its safety records and extreme agility. One senior air force pilot said the accident was "bizarre", and speculated that either the crew was incapacitated or a fire broke out aboard the plane.
Rescue operations are underway at the crash site, air force sources said. "The aircraft was airborne from Agra at 10am for a routine flying training mission. A court of inquiry has been ordered to investigate into the cause of the accident," the IAF said in a statement.
The crash took place in Karauli district in Rajasthan, some 72 miles from Gwalior, where it was due to land.
The IAF started inducting C-130J in February 2011 and has half a dozen of them in service. It is also set to induct another six of them.
The C-130J is among the most agile aircraft in service today, and has an impressive safety record. The transport aircraft is meant for an array of operations including movement of Special Forces, and difficult landings. It was highly effective in rescue operations in Uttarakhand after the flash floods, and has proven its capability to carry out landings on remote airstrips close to China border. Both these have exhibited the flexibility and capability of the American aircraft, manufactured by Lockheed Martin.
Starting its history sometime in the 1950s with the US military, C-130 is among the world's most recognizable military aircraft that has participated in numerous military campaigns and in service with several militaries.
Though several C-130s have crashed during Vietnam war, the aircraft is reputed for its reliability. Last time South Asia saw a C-130 crash was when a C-130 aircraft of the Pakistan air force carrying Pakistani dictator General Zia-ul-Haq and the US ambassador Arnold Lewis Raphel were killed when it crashed on August 17, 1988.