The exercise, code-named "Hand-in-Hand 2014", will take place in Pune and had been coordinated through talks between the two countries' leaders and military, state-run news agency Xinhua reported today.
The date of the drill has not yet been released.
A company of 139 soldiers from southwest China's Chengdu Military Command will join their Indian counterparts for the exercise to be conducted in urban cities and townships.
The two sides will also send representatives to observe the drill.
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The first was in southwest China's Yunnan Province in 2007 followed by another next year in Belgaum in India. The last one was held in southwest China's Sichuan in 2013.
The previous three drills were focused on mountainous areas.
The exercise will take place amid a series of Chinese incursions into Indian territory along the Line of Actual Control.