In one of the worst attacks to hit India's armed forces in nearly three years, the car rammed into one of the buses carrying Central Reserve Police Force (CRPF) personnel in Awantipora in the disputed Himalayan region.
CRPF Director General Rajeev Rai Bhatnagar told the ANI news agency that there were around 2,500 personnel in the convoy when the attack took place.
The Associated Press news agency reported that more than 20 personnel had been wounded in the blast.
"An IED went off as a CRPF convoy passed by," senior police officer Munir Ahmed Khan said.
"We have 12 CRPF fatalities. We are evacuating the injured from the site and don't have their number at the moment."
Videos from the blast site showed smoke billowing from the remains of the CRPF vehicle, while bodies lay strewn across the road.
Omar Abdullah and Mehbooba Mufti, two former chief ministers of Jammu and Kashmir, condemned the attack on Twitter.
"Twelve of our security personnel have been martyred and several have been injured. No words are enough to condemn the gruesome terror attack. How many more lives will be snuffed out before this madness ends?," Mufti said.
The attack on the Indian paramilitary forces convoy comes a day after at least 25 high school students were injured by an explosion in their classroom in Indian-administered Kashmir.
In the past, civilians have died or been injured while playing with explosives found at the sites of gunbattles between rebels and Indian troops.
Kashmir has been divided between India and Pakistan since the end of British colonial rule in 1947, but both claim the Himalayan territory in full.
India maintains roughly 500,000 soldiers and regularly cracks down on protesters, firing tear gas and pellet guns at demonstrators.
Nearly 70,000 people have been killed in past three decades in the uprising against Indian rule.
The rebels are demanding Kashmir be made part of Pakistan or become an independent country.
India accuses Pakistan of arming and training the rebels, a charge Islamabad denies.
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