The announcement about honouring the 93-year-old actor was welcomed by his son Sunil Sikand.
The award, named after the father of Indian cinema Dada Saheb Phalke, will be conferred on Pran on May 3, which will also mark the 100 years of cinema this year.
Pran, who has acted in over 400 films in his six-decade-long career, retired from acting in 1998.
Beginning his career as a hero in 1940 with 'Yamala Jat', Pran went on to achieve fame as a villain in numerous film including classics like 'Milan', 'Madhumati' and 'Kashmir Ki Kali'.
Such was the magic of his unique on-screen villain, that people stopped naming their children 'Pran' at the height of his fame as an actor.
He later favoured character roles, playing the friend, beloved father and grandfather in movies like Amitabh Bachchan starrer 'Zanjeer', 'Upkaar' and 'Parichay'.
Welcoming the honour, Pran's son Sunil said "It is an amazing thing. We are happy and honoured."
When asked whether the honour came too late for the veteran actor, Sunil said, "I don't want to get into all these details. We are happy with the award. My father is watching the news on TV right now."