They were killed after fighting erupted during a search operation on Monday close to the Line of Control, which separates Indian- and Pakistan-controlled Kashmir.
It is said to be the deadliest attack on army forces since February.
Tensions have escalated amid a wave of civilian killings by suspected rebels.
Soldiers surrounded a village in the district of Poonch after reports that armed insurgents were hiding there, officials in Indian-administered Kashmir said.
An officer and four other soldiers were killed during the search operation, which is ongoing, army spokesman Lt Colonel Devender Anand said.
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