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Nawaz gave away 16 runs off the final over. The left-arm spinner was also guilty of bowling two wides and a no-ball amid mounting pressure at the MCG.
Kohli remained unbeaten on 82 off 53 balls, while all-rounder R Ashwin hit the winning shot off the final ball to trigger wide celebrations in the Indian dugout and among the supporters.
The all-rounder went for 36 in his last two overs.
Kohli and Pandya revived India with a 113-run stand for the fourth wicket after they were reeling at 31/4 at one stage.
Kohli smashed an unbeaten 82 off 53 balls to guide the Men in Blue home after Pakistan had reduced India to 31/4 in their chase of 160.
'We need to come here thinking that it's a 40-over game. We'll be ready for that. If the situation demands that it's a shorter game, we'll be ready for that as well,' said Indian skipper Rohit Sharma.
India lead Pakistan 5-1 in T20 World Cup. However, Pakistan thrashed India by 10 wickets last year to record their maiden win over the arch-rivals in any World Cup.
Gurbaz was trapped in front of the wicket for a golden duck.
The West Indies are the only team to have won the title twice.
The total prize pot of $5.6 million will see the runners-up assured of $800,000 and the losing semifinalists receiving $400,000 each.