The transfer was intended to build facilities for the hundreds of thousands of pilgrims who flock there every year.
Local Muslims, who form the majority in Kashmir, have said they see the land transfer as a covert attempt to increase Hindu settlements in the area and dilute their religious identity.
But Indian officials dismiss the allegations saying authorities have never tried to encourage Hindu migration to the region.
On Sunday Ghulam Nabi Azad, Kashmir's chief minister, promised that his cabinet would scrap the plan but protesters have continued to demand the formal revocation of the land transfer order.
Violent protests
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| Each year thousands flock to the Hindu shrine in Kashmir to pray for peace [Reuters] |
Tight security has been deployed in cities across most of Jammu-Kashmir state with businesses, shops and schools closed for several days.
On Monday police fired tear gas and swung batons in the state capital, Srinagar, where clashes left dozens of protesters and policemen hurt.
There were also reports that police in Baramulla district fired into the air and used batons to ward off hundreds of protesters who attacked a police station.
Al Jazeera's Divya Gopalan reporting from the shrine says the number of pilgrims has dwindled over the last few days from the usual 40,000 devotees to a few thousand.
She said protesters were accusing the Hindu trust of trying to marginalise local Muslim traders.
Over the past week, police have used live ammunition, tear gas and bamboo batons to disperse crowds of protesters across Indian-controlled Kashmir.
At least four protesters have been killed and more than 300 injured since clashes erupted, evoking memories of widespread anti-India protests that swept the region after a separatist insurgency broke out in 1989.
Muslim majority Kashmir is divided between India and Pakistan, but claimed in whole by both countries.