The dynamic response of ballasted track transition zones is a critical aspect in railway geotechnics, affecting the performance of track geometry. Track stiffness and ballast stress are used as key parameters in finite element (FE) numerical simulations for several types of subgrade soils prevailing in the Indian subcontinent with elastic modulus (E) ranging from 30 to 100 MPa. A smooth transition in stiffness variation at the transition zone has been investigated by providing a blanket layer with varying elastic modulus on the top of the subgrade soil. Provision of a blanket layer results in a 38–55% reduction of stresses transferred to the subgrade, thus preventing subgrade failure, mud pumping, and moisture variation in the subgrade that are commonly encountered in the field. Further, the dynamic response is evaluated for two different axle loads, 25 T and 32.5 T, and two different speeds, 120 km/h and 160 km/h, respectively, to assess the track’s performance during typical operational conditions as per standard guidelines of the Indian Railways. The ballast stress and track stiffness are also probed for different initial differential settlements (DS) at the transition zone. The findings of the current study contribute to the design, construction, and maintenance of the ballasted tracks, enabling enhanced performance of railway infrastructure.