The Centre also condemned Salahuddin's recent utterances against India, and said his designation as a global terrorist by the United States was "well deserved".
Home Ministry spokesperson Ashok Prasad said the government had been describing Salahuddin as a terrorist all along, and his own remarks had confirmed that.
"His designation as a global terrorist by the US is well deserved," he told reporters here.
Prasad said Salahuddin was also "instrumental" in providing funds to terrorists and separatists and giving other kinds of assistance to the militants.
Salahuddin had on July 1 claimed that his group had the capability to launch attacks inside India.
The US declared him a "Specially Designated Global Terrorist" on June 27.
"We are not terrorists... Our struggle is for freedom from India and it will continue till the liberation of Kashmir," the 71-year-old Kashmiri separatist leader, who is based in Muzaffarabad, the capital of Pakistan-occupied Kashmir, had said.
He vowed vowed to continue the struggle for "liberation" of Kashmir from India, days after the US blacklisted him as a "global terrorist".
In a notification, the State Department said Salahuddin, who hails from Kashmir and is based in Pakistan for the last 28 years, "has committed, or poses a significant risk of committing, acts of terrorism."
The US took the step against Salahuddin, whose original name is Mohammed Yusuf Shah, as he had "vowed to block any peaceful resolution to the Kashmir conflict, threatened to train more Kashmiri suicide bombers, and vowed to turn the Kashmir Valley into a graveyard for Indian forces".