The government announced on Tuesday that a fine of 2,000 rupees (Â£20; $29) would be imposed on students who cheat.
Students will also be barred from taking exams and anyone helping them cheat will be charged and sent to jail.
Last year, the government was embarrassed after parents and friends of students were photographed climbing school walls to pass on answers.
An estimated 1.5m students will take their school leaving exams in Bihar in February and March.
The tests are seen as crucial for a successful career.
About 300 people, mostly parents and relatives, were arrested last year in Vaishali district, Bihar after photographs showed blatant cheating emerged in the media.
Students were seen copying answers from smuggled-in note sheets, and police posted outside test centres were even seen being bribed to look the other way.
But Bihar Education Minister Ashok Chaudhury said that his government was determined to avoid cheating this year.
"This time we are determined not to allow something like that to happen again and have taken several decisions to ensure a cheating-free examâ€¦ cheating will not be tolerated this time," he told The Hindu.
Lalkeshwar Prasad Singh, an official in the education department, said CCTV cameras would be installed in most schools.
"Live stream from some exam centres with a tainted record will be monitored by senior officers," he said.
India's Bihar state has announced tough measures like fines and jail terms to stop cheating in school exams.