Restrictions on the assembly of people will remain in force to maintain law and order.
During the interrogation, the militants confessed their involvement in the crime, he added.
The enhanced allowance will be applicable to all paramilitary personnel deployed in Jammu and Kashmir and Naxal-hit areas.
Weapons and war-like stores were recovered from the encounter site.
Earlier, a youth injured during clashes last week succumbed at a hospital in Srinagar on Monday morning.
With Lone's death, the number of people killed in the unrest in the Valley, which entered the second month on Monday, reached 55, including two police personnel.
"Areas under the jurisdiction of police stations of district Srinagar -- Batamloo, Bemina, Qamarwari, Kralkhud, Nowhatta, Khanyar, M.R. Gunj, Safakadal, Maisuma, Shaheedgunj and Abi-guzar area of police station, Kothibagh will remain under curfew from 6 am till further orders," District Magistrate, Srinagar, Mehraj Ahmad Kakroo said.
Two men hailing from Kashmir were detained in Alwar, as they apparently resembled the sketches of the suspects in the Delhi high court blast case.
To curb the spread of violence, authorities on Wednesday clamped a curfew on more areas in south Kashmir, where three youths were killed when Central Reserve Police Force troopers allegedly opened fire during clashes with protestors on Tuesday.
People belonging to different areas of Anantnag assembled at Mattan bus stand on Tuesday morning to protest the killing of five youths in Sopore and Baramulla, police said. Police and paramilitary forces deployed in the town, 65 km from Srinagar, asked them to disperse but when they refused to budge, they fired tear gas shells and batons to disperse them.
Tahira, 44, sustained injuries during the encounter and was rushed to the district hospital, but she could not be saved.
The shrine is believed to be the first halting point of the Sufi saint who has places of worship named after him across the Kashmir valley.
In Srinagar, wearing black bands, scores of PDP leaders and activists, led by party president Mehbooba Mufti, took out a protest march from the party's head office near the Sher-e-Kashmir Park.
Four militants, including three of Hizbul Mujahideen, were on Monday killed in two gunfights during search operations in the Kashmir valley, officials said.
With his arrest, the three-member terror module has been wiped out within days of the attack.
The heightened militancy this year in Pulwama is receiving ground support with the local people posing maximum resistance to the forces.
Curfew remained in force in Srinagar district, Anantnag town and Magam area of Budgam district as a precautionary measure even as normal life was paralysed for the 40th consecutive day on Wednesday in Kashmir where 63 persons have been killed in the ongoing unrest.
Sheikh Salim Gafur has been selected for the honour as he displayed some rare grit and bravery and continued to drive the bus of the Amarnath pilgrims, which came under attack by the terrorists on July 10, 2017, in Jammu and Kashmir, a home ministry official said.
The clashes in the Valley erupted after the killing of young Hizbul Mujahideen commander Burhan Wani in an encounter with security forces on July 8.
The terrorists' action came on a day when the NIA arrested the second son of globally wanted terrorist Syed Salahuddin.
Barring a stone pelting incident at Soibagh area in Budgam district, the situation was peaceful in the areas where the polling was held, the officials said.
The CM apprised the home minister about the steps taken to maintain peace in the Kashmir Valley
Ahead of the Parliament session, beginning Monday, the government is apparently aiming to build a consensus to deal with its biggest neighbour as well on Kashmir issue.
The army has quietly moved an entire brigade into south Kashmir to clear it of militants and protesters.
The army had to had to aim at the crowd when jawans claimed to have been fired upon from the other side.
The militant, who was identified as Bashir Ahmed Ganai, had entered the mosque at Sheikhgund village in Anantnag district to evade arrest during a search operation.\n\n
What happened in India in the week gone by? Here's the top stories that captured India's attention in the week gone by.
Two Central Reserve Police Force personnel, including an officer, were killed in a militant attack in Sangam area of Anantnag district in Jammu & Kashmir.
The situation in most parts of Kashmir Valley returned to normal after a week of curfew and violence, barring Anantnag town where police lobbed tear gas shells to quell stone-pelting protestors.
Normal life remained disrupted for the 24th consecutive day due to the strike call given by separatists against civilian deaths during the protests.
Two tourists were killed and six others wounded in a powerful bus blast at Bejibehara in south Kashmir's Anantnag district on Saturday afternoon.
India hockey players Yuvraj and Devender Walmiki attend Rashtriya Rifles for their silver jubilee year celebrations in Anantnag earlier this week.
A trooper of the paramilitary Central Reserve Police Force shot dead two of his colleagues and wounded two others inside the heavily guarded CRPF camp at Kokernag in south Kashmir Anantnag district on Friday night.
A man injured in a stone-pelting incident in Anantnag district of Kashmir succumbed to injuries, taking the death toll to five in the clashes that erupted in the Valley following hanging of Parliament attack convict Mohammad Afzal Guru.
Two militants were killed while an army major and a trooper were wounded in a ongoing fierce encounter in south Kashmir's Shopian district.
One person was killed in a clash between a mob and security forces in downtown Srinagar on Sunday evening, shattering the peace that was by and large witnessed in Kashmir through the day with curfew in force in the capital and two other towns.
At least six Central Reserve Police Force jawans were injured when unidentified militants opened fired on their convoy on Srinagar-Jammu national highway in south Kashmir's Anantnag district on Monday.
Three weapons have been recovered from them.
