A two-time Asian tour winner, Khan had a third straight five-under-67 that took his score to 15-under-201 in the PGTI's year-end championship at the Royal Calcutta Golf Club.
Fresh from his recent win on the European Tour, Sharma carded an error-free 67 to be 13-under-203 at second place.
The 21-year-old is likely to be the most serious challenger to Khan in the final round, as the rest of the field is another five shots behind.
Khan (67-67-67), the overnight leader by one, enjoyed yet another solid start as he sank three birdies on the first five holes.
He stumbled in the middle with consecutive bogeys on the sixth and seventh but rallied with a fabulous back-nine that featured four birdies.
The reigning PGTI Order of Merit champion then had a lucky break on the 15th where his second shot was heading out of bounds but bounced on the cart path and landed behind the bunker enabling him to make an up and down for birdie.
Sharma (66-70-67) fought back after a sedate second round as he picked up three birdies on the front-nine and two more on the back-nine.
The youngest Indian winner on the European Tour, Sharma had a 12-feet eagle putt on the 15th which he missed narrowly.
He ended the round in style with a 25-feet birdie conversion on the 18th.
"Even though there is tough competition between us, I have enjoyed playing together over the last two days. There is less stress in the group as we enjoy each other's company on the course," Sharma said about his competition with Khan.
He is now on the verge of winning his second PGTI Order of Merit crown as his nearest rivals on the money list, Ahmedabad's Udayan Mane and Sri Lankan Anura Rohana, are placed 10 and seven shots behind him respectively.
Gurgaon-based Veer Ahlawat moved up from overnight tied sixth to tied third after posting a 68 that featured an eagle-two on the 16th where he drove the green and made a 30- footer.
Shamim Khan (66), staring at his second PGTI Order of Merit win after 2012, was tied for fifth along with Chandigarh's Ajeetesh Sandhu (69) and Patna's Aman Raj (70) at seven-under-209.
Local favourite SSP Chawrasia (72) was tied 10th at five-under-211.
Kolkata rookie Viraj Madappa is all set to win the PGTI Emerging Player of the Year title.
Madappa, placed tied 12th at four-under-212, is currently six shots ahead of Karandeep Kochhar, his nearest rival in the Emerging Player race.
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