Khan, who moved to Mumbai with her family from Pakistan to work in Bollywood, has been missing for 11 months, IBN Live reports.
Garib Das of the Jammu and Kashmir police force said in a statement: "The police are looking at the possibility of Laila Khan and her family members being killed in Mumbai. The police are likely to visit Mumbai for further investigation in the case."
In February last year, Khan, her three siblings, their mother and another relative went missing from their flat in Mumbai.
Her father Nadir Patel, who was divorced from her mother, filed a police complaint stating that his daughter has gone missing along with her mother Saleena Patel, sister Azmina Patel, her stepfather Asif Sheikh and family friend Pervez Iqbal Tak.
Tak was arrested a couple of weeks ago from Jammu in connection with a different case, however, he has reportedly shared details of the actress and her family's kidnapping.
Tak has told the police that Khan and her family were shot dead by three men outside Mumbai after they went missing over a property dispute. Tak also claims that the actress was married to a close aide of India's most wanted fugitive Dawood Ibrahim.
The actress was linked to a terrorist attack in Delhi last year.
Khan made her film debut opposite Rajesh Khanna in the film Wafaa in 2008.
Rakhi Sawant's director brother Rakesh had launched her in the film.