Dipa got the nod of the 12-member committee, which met here today, on the basis of her stupendous performance in Rio although the deadline for sending in the recommendation to the Sports Ministry was already over.
The 23-year-old Tripura-born gymnast became an overnight sensation after she finished fourth in the women's vault final on August 14, missing the the bronze by a mere 0.150 points.
Jitu, on the other hand, was ranked third in the world in the men's 10m air pistol. He was one of two Indian shooters to make the final of their respective events in Rio, the other being Abhinav Bindra.
The 28-year-old Rai entered the final of the men's 10m air pistol before ending up eighth but could not advance to the same stage in the 50m pistol, his pet event, in the Rio Games.
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This year, Rai has won the silver medal in the 10m air pistol event at the ISSF World Cup in Baku, Azerbaijan and the gold medal at the ISSF World Cup in Bangkok in 50m pistol. He was the first shooter to qualify for Rio Games after winning a silver medal at the World Championships in Spain in 2014.
An Olympic medal has also been treated at par with medals in the World Championships.
Indian Test cricket captain Virat Kohli's name was also discussed but the likes of Dipa and Jitu were preferred since this is an Olympic year, the sources said.
Kohli also missed out because the government wants to keep a few slots open in case the likes of shuttler P V Sindhu, who has reached the semifinals in the Rio Games, wins a medal.
The Khel Ratna winner (s) will receive the award from President Pranab Mukherjee on National Sports Day on August 29.
Woman tennis star Sania Mirza is the last recipient of the award in 2015.