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Indian troops killed a suspected militant during a gunbattle in the federally-controlled Jammu and Kashmir region on Tuesday, two officials said, as violence escalated in the territory at the heart of the decades of tensions with Pakistan.

Fighting between Indian security forces and militants broke out in the early hours in the Surankote area of Jammu's Poonch district, where a small group of insurgents are believed to be holed up, a police official said.

"We have shot one militant," another security official said. Both declined to be named because they aren't authorised to speak to media. The military lost nine soldiers in the same area earlier this year.

In Kashmir's main city of Srinagar, a policeman who was on a bus that was attacked by militants on Monday succumbed to his injuries, taking the number of fatalities from the incident to three, a local police official said.

Militants had opened fire on the bus on the outskirts of Srinagar, wounding 16 personnel who had all been taken to hospital. read more

Vijay Kumar, Kashmir valley's police chief, said Monday's attack had been carried out by militants from the Jaish-e-Mohammad, a Pakistan-based group.

India has long accused Pakistan of supporting an armed insurgency in Kashmir, a Himalayan region that both countries claim in full but only control parts of.

Pakistan denies the charge, saying it provides moral and diplomatic backing for the self-determination of Kashmiri people. (Reuters)