Security forces launched a cordon and search operation in Khrew following information about the presence of militants in the area, an officer said.
On Friday, CREDAI, which has 12,000 members, organised a ceremony in Delhi-NCR to hand over flat allotment letters to the families of Pulwama martyrs.
The terrorist associate has been identified as Ishfaq Ahmad Dar alias Maheed resident of Dangerpora-Padgampora in Pulwama district.
The arrested person has been identified as Jahangir Ahmad Parray of Gulsahanpora in Tral area of the district.
BJP spokesperson Sambit Patra hit out at the opposition party and said it is "best at attacking India and protecting Pakistan".
As the forces were conducting searches, the militants fired at them, triggering an encounter, resulting in their killing.
The encounter started on Sunday morning.
The security forces have recovered arms and ammunition from the site of encounter.
Internet facilities were on January 2 restored in health institutions across Jammu and Kashmir while the connection at rest of the place is also being restored on a "war footing".
The air strike was followed by an aerial combat between air forces of the two countries on February 27 when Pakistan jets entered India.
Imran Khan's rise to power in August 2018 prompted exchange of pleasantries between the cricketer-turned-politician and Prime Minister Narendra Modi.
The militant surrendered before a senior police officer in Awantipora area of the district, they said.
The Police has requested citizens not to venture inside the encounter zone since such an area can prove dangerous due to stray explosive materials.
Civil society delegation not allowed to visit Pulwama citing possible terror attack: Wajahat Habibullah
Wajahat Habibullah said the group met several people to know about the difficulties being faced by the Kashmiris.
One Ahmad with the help of three other JeM associates, identified as Aqib Ahmad, Adil Ahmad Mir and Owais Ahmad, conspired and executed the terror attack in Airhal area