An exchange of fire between terrorists and security forces was also reported from Keran sector.
SPO Ahmad succumbed to injuries while SI Parihar has been admitted to the army hospital.
The incident took place at Tumchi Nowpora of Pulwama district in South Kashmir when the labourer, Mukesh Kumar, was in the market to buy some vegetables.
He said law enforcement agencies are cracking down on those involved in recruitment for terrorist groups as well as narcotic dealers and smugglers.
The encounter broke out on Saturday morning after the security forces launched a cordon-and-search operation in the area, following inputs about the presence of terrorists there.
The Jammu zone Inspector General Danish Rana said that the encounter took place on early Thursday morning in which two SPOs, who had deserted the police force in September and joined militants, were eliminated.
The encounter took place in Lacchipora village of Anantnag district.
Top Jaish-e-Mohammad terrorist Kaiser Koka was among two ultras killed.
The official said that all the militants were foreign nationals.
Security forces on Friday launched a massive cordon and search operation in the forest area of Jammu and Kashmir's Poonch district, a day after five army personnel were killed and two others injured in a terrorist attack.
The security forces have killed a dozen militants in three separate gunfights in Jammu and Kashmir till Saturday.
A Major and his team have been accused of entering into a criminal conspiracy to abduct three youths, who were later killed in an alleged fake encounter, in a probe report by Jammu and Kashmir Police handed over to the Army which ordered a high-level enquiry into the case.
One militant was killed and an army trooper wounded in an ongoing encounter in south Kashmir Tral area of Pulwama district on Saturday morning.
While two Lashkar-e-Taiba (LeT) terrorists were killed in Shopian district, two Ansar Gazwat-ul-Hind ultras were gunned down in Pulwama district in south Kashmir.
An army major, a naval commando and two top militants were among the eight persons killed in two encounters in north Kashmir in the past 24 hours.
He asserted his force was as competent as the CBI to probe the Kathua rape and murder case.
Security forces tightened their cordon around a forest area in the higher reaches of Doda district on Tuesday evening following an encounter with hiding terrorists, officials said.
Colonel Joseph is the highest ranking army official to have been killed in counter-insurgency operations in the last one year. Earlier, another colonel from Maratha Light Infantry was killed while leading his men in busting a militant hideout in Baramulla sector in the state.
A bullet does not whom it will hit. My appeal to all the young boys is that they should remain in their homes and not come to encounter sites, he said.
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An unidentified terrorist was on Tuesday killed in an encounter with security forces in Sopore area of North Kashmir's Baramulla district, police said.
A top Lashkar-e-Tayiba militant commander was on Friday killed in an encounter with security forces in a village in Kupwara district of north Kashmir.
Authorities ordered closure of schools and other educational institutions as a precautionary measure.
Two army men including an officer were injured in an ongoing fierce gunfight in north Kashmir frontier Kupwara district late Friday.
"As the troops moved in, they came under heavy fire from the militants hiding in a house. Reinforcements were immediately rushed to the area and the house was surrounded," a senior police officer said in Srinagar.
Three militants, two of them foreign ones, were killed in a fierce encounter between security forces and militants in south Kashmir's area of Tral early on Monday.
ADGP, Kashmir, Vijay Kumar said both the terrorists had escaped from from a cordon and search operation last week in nearby Magam area.
Three militants trying to infiltrate into India and a special police officer were killed in separate encounters with security forces in Jammu region, defence sources said on Sunday.
The militants were affiliated with the Harkat-e-Jehad-e-Islami outfit.
Two Lashkar-e-Tayiba militants were on Thursday killed in an encounter with security forces in the border district of Poonch in Jammu and Kashmir.
The encounters took place in Pulwama, Ganderbal and Kupwara districts of the Kashmir valley, a police official said.
Lieutenant Colonel SK Natt was evacuated to a hospital for treatment.
Three top Lashker-e-Tayiba terrorists were killed and an army jawan was injured in an encounter with security forces in Poonch district of Jammu and Kashmir on Thursday.
Assistant Sub-Inspector Babu Ram and Constable Altaf Hussain Bhat of Jammu and Kashmir Police were on Saturday posthumously conferred with the Ashoka Chakra and the Kirti Chakra awards respectively on the eve of the 75th Independence Day. While the Ashoka Chakra is India's highest peacetime gallantry honour, Kirti Chakra is the second in order of precedence of peacetime gallantry awards.
The encounter took place at Qasbayar area of the south Kashmir district.
Contradicting Mehbooba Mufti's stand, the Bharatiya Janata Party on Saturday said security forces had the knowledge of Hizbul terrorist Burhan Wani's presence at the encounter site.
A top terrorist commander of Lashkar-e-Tayiba outfit was killed in a fierce gunfight in north Kashmir frontier Kupwara district on Sunday morning.
'Individuals have been found providing money to major terrorist groups, Hurriyat leaders, separatists and stone-pelters in Jammu and Kashmir.'
The encounter took place in Hajin area of north Kashmir's Bandipora district on Wednesday.
Two militants, including a commander of Jaish-e-Mohammad (JeM) outfit, were killed in a fierce south Kashmir encounter that ended on Saturday evening.
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