Police strongly denied rumours that a mosque was damaged during the gunfight between the security forces and the militants.
A gun battle broke out between the security forces and the terrorists in Jammu and Kashmir's Shopian area on Saturday evening.
Earlier in the day, two Indian Army soldiers were killed in the fierce gunbattle.
In the initial gunfight five soldiers including an army captain sustained injuries and were shifted to military hospital Badamibagh Srinagar.
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Separately, in north Kashmir's Bandipora, two policemen were wounded when they were shot by suspected militants, and a civilian succumbed to his injuries from a petrol bomb attack in Srinagar.
Police said troops of counter insurgency 55 Rashtriya Rifles (RR), special operations group of state police and central reserve police force surrounded Awneera village on Saturday after receiving information about the presence of terrorists.
However, this morning as the searches were going on, militants again opened fire which was retaliated by the forces, triggering off a fresh gunfight.
Police said three militants are believed to be holed up inside the village.