Nearly 6,000 pilgrims, tourists and others are believed to have died when flash floods and landslides struck northern India last month.
"Compensation to their families will begin tomorrow on the assumption that they (the missing) are dead," the Chief Minister of Uttarakhand, Vijay Bahuguna, said in the state capital Dehradun on Monday.
The victims were swept away when floods caused by torrential monsoon rains hit the Himalayan state of Uttarakhand in June, destroying entire villages and towns.
Raging rivers flattened houses and buildings in the state, which was packed with travellers in what was a peak tourist season.
Bahuguna put the estimated death toll at 5,748 people. Some 1,000 people were confirmed dead at the time of the floods. Thousands of others had until Monday been officially listed only as missing, meaning compensation could not be paid.
The military mounted a massive rescue operation in the worst-hit areas, plucking stranded victims to safety.
Bahuguna said his state government would compensate local residents while other governments would financially care for their residents, many of whom were pilgrims visiting remote Hindu shrines in Uttarakhand.
Some 924 of the dead were from Uttarakhand and "their families will receive compensation from state funds", the chief minister told reporters.
He said 500,000 rupees ($8,394) would be given to each family. The Uttarakhand government will also set up a fund, with 500,000 rupees to be given to each child orphaned in the disaster, he said.
The rains and landslides swept away hotels and roads during the peak pilgrimage time in Uttarakhand, known as the "Land of the Gods" for its myriad temples.
The Indian military, backed by a fleet of helicopters, rescued more than 100,000 pilgrims and tourists from marooned villages and resort towns after the disaster.
Unmanned drones were deployed to scan thick jungles to find those stranded. Soldiers used harnesses and erected rope bridges across flooded rivers to move people to safety.
Chief Minister Bahuguna said his next priority was to rebuild the scenic state in the Himalayan foothills, where scores of bridges have crashed into swollen rivers.
"The top priority is to provide drinking water, the restoration of power supply and repair of roads," said, adding three billion rupees had been approved to restore highways.