Officials in the Ministry of Information and Broadcasting told PTI on Wednesday that Dey's name was finalised earlier this week by a five-member committee.
The 90-year-old singer will be conferred the award in a ceremony on October 21 by President Pratibha Patil.
Dey, one of the greatest playback singers in Indian cinema, ruled the playback music scene from the 1950s to the 1970s. He has sung more than 3,500 songs.
The award, named after the father of Indian cinema Dada Saheb Phalke, is the highest honour in Indian Cinema.