Shops, businesses and all schools and colleges across Assam were closed and there were few vehicles on the roads, said a police official in Guwahati, Assam's capital.
There were no reports of violence, said the official, who spoke on condition of anonymity.
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Robin Handique reportedly died of kidney failure, but the rebels have accused state authorities of not providing him with adequate medical treatment.
Handique was arrested by the army in neighboring Bhutan during a December 2003 crackdown on Indian militants in the Himalayan kingdom. He was later handed over to Indian authorities in Assam.
ULFA rebels have been fighting for an independent homeland since 1979. At least 10,000 people, mostly civilians, have died in fighting over the past 15 years between government forces and rebels from ULFA and another separatist group in Assam.
The rebels announced on Wednesday that an eight-member team would start peace talks with the federal government in October on ending the 26-year-old insurgency.