Seven intruders were killed at Krishnaghati in the border district of Poonch on the Line of Control on Saturday.
An Army Major and a jawan were also killed in the fierce encounter.
Police said that a group of heavily armed infiltrators had sneaked in to the Indian side and were engaged after being spotted by the security forces.
"They were challenged to surrender but they opened fire on the troops. Seven intruders were killed in the encounter," a senior police officer said, adding, "The area has been cordoned off by the troops and the operation is still continuing."