State of Eligibility is the Indian state where your school (from which you have completed your 12th Standard) is located.

For ex. If you are taking coaching classes in Rajasthan and you have taken dummy admission in a school in your home state (Like Uttar Pradesh) then State of Eligibility that you will have to fill in the application form will be Uttar Pradesh and Not Rajasthan.

Case 2: If your home residence is in Madhya Pradesh and your school is located in Bihar then State of Eligibility in this case will be Bihar.