The IOC suspended India's national Olympic committee on Tuesday because of government interference in its election process, a major embarrassment for the world's second most populous nation.
After months of warnings, the IOC executive board imposed the sanction when the Indian Olympic Association failed to comply with the world body's demands for holding independent elections.
The decision, first reported by The Associated Press, was announced at an IOC news conference after the executive board's first day of a two-day meeting in Lausanne.
IOC spokesman Mark Adams said India was suspended "due to its failure to comply with the Olympic Charter and its statutes and failure to inform the IOC in a timely manner."
Under the suspension, the Indian body will stop receiving IOC funding and its officials will be banned from attending Olympic meetings and events. India's athletes will be barred from competing in Olympic events under their national flag, although the IOC could allow them to do so under the Olympic flag.
"The IOA has lost all the rights covered by the Olympic Charter," said Pere Miro, director of IOC relations with national Olympic committees. "Today, for Indian athletes it is not possible to take part in any competition under IOC jurisdiction. The IOC has always had the intention to protect the athletes. But for the moment, there is no exception."
India, with a population of more than 1 billion, has failed to pull its weight in the Olympic arena, in contrast with neighboring China and its emergence as a global sports powerhouse. India would have few athletes in contention for the 2014 Winter Olympics in Sochi, Russia, but would hope to resolve the dispute with the IOC ahead of the 2016 Summer Games in Rio de Janeiro.
The IOC had repeatedly told the Indian body to adhere to its own constitution and the Olympic Charter and not follow the government's sports code for this week's elections.
The IOC said it will not recognize the Indian elections, scheduled for Wednesday, calling them "null and void." No elections will be authorized by the IOC until all the issues have been resolved, Miro said.
"The election process was tarnished since the beginning," he said. "What is absolutely clear is that what has happened in the past is null and what happens now is the same."
While it's not clear how much money in total will be withheld from India, Miro noted that each national Olympic body receives about $90,000 a year in direct IOC grants. The bodies receive more money on top of that for scholarship, coaching and other development programs.
The Indians have been mired in wrangling over the elections to replace Suresh Kalmadi, who was jailed for nine months on corruption charges related to the 2010 Commonwealth Games in New Delhi. Kalmadi, who headed the IOA for 16 years, decided not to seek re-election.
The Indian vote, originally scheduled for last month, has been postponed to Wednesday following the resignation of election commission chairman S Y Quraishi.
On Friday, the IOA announced the appointment of some officials to posts that were not contested in the elections. Appointed as secretary general was Lalit Bhanot, who is also facing graft charges relating to the Commonwealth Games.
But Miro said the appointment of Bhanot and other officials would not be recognized by the IOC.
Indian Sports Minister Jitendra Singh called the IOC decision "very unfortunate, more so for sports persons."
"I'm only concerned about the sports persons, am waiting for details," he told the Times Now news channel.
Abhey Singh Chautala, whose unopposed election as IOA president is not recognized by the IOC, told reporters in New Delhi that a suspension would be a "one-sided decision."
"We had written to them, asking them to give some time to our two-member committee to tell them about our position," he said. "They've not listened to our side. We will go to IOC again and explain to them how elections were carried out here."
The IOC had also recently threatened to suspend Kuwait's Olympic committee, but the Gulf nation amended its sports law last week and was not hit with an IOC sanction on Tuesday.