The pact will help in protecting millions of bank accounts, credit card details and health details of UK citizens stored at Indian call centres which are said to be vulnerable to hacking attacks.
Prime Minister, David Cameron said: "Other countries securing their data is effectively helping us secure our data.
"I think this is an area where Britain has some real competitive and technology advantages," Cameron said.
"The threat in terms of cyber security comes from all sorts of different places and organisations – a lot of it is criminal. Hacking bothers me wherever it comes from."
Both nations would also co-operate on boosting the security of UK and Indian computer networks to help protect against cyber attacks by terrorists, criminals and hostile states.
According to reports, India is anticipated to reach 300 million online users by 2015, surpassing the U.S.
The security partnership is focussed on establishing to share data on malicious activitiesin cyber space, police training exchanges in hi-tech crime, cyber forensics and meetings among leaders in cyber security research to support collaboration.
As part of the deal, a ministerial-led cyber business and skills delegation will visit India to support business connections and create opportunities on vocational training. A new scholarship programme will also be launched to allow Indian experts to be trained in cyber security technology, law and policy.