Pakistan's army says Indian troops have raided a military post in Kashmir, killing one soldier and injuring another.
The Pakistani military responded to the attack on the Sawan Patra checkpost, an army spokesman said in a statement.
The two sides then exchanged fire across the 'Line of Control', an internationally recognised line in the disputed Kashmir region patrolled by troops from both countries.
Indian army spokesman Colonel Jagadish Dahiya said Indian troops had not crossed the Line of Control.
"However, there was a ceasefire violation by Pakistan. Our troops retaliated by firing," he said
"None of our troops crossed the Line of Control. We have no casualties or injuries."
Another spokesman for the Indian army said its post at Churuda, 100 kilometres northwest of major city Srinagar, came under "unprovoked" heavy mortar and automatic gun fire for about five hours early on Sunday.
"We did retaliate," Colonel Rajesh Kalia said.
There were more than 75 ceasefire violations along the Line of Control in 2012, killing eight people.
India and Pakistan have fought three wars since 1947, when they became independent from Britain. Both countries claim Kashmir as their own.
Kashmir, and the human rights abuses committed there by Indian troops, is a politically explosive issue in Pakistan.
Pakistani security forces have long trained militant groups to attack Indian soldiers.
The two countries fought their most recent war in 1999, when Pakistani troops crossed the Line of Control and occupied Indian territory in Kargil, but were forced to withdraw.
After a period of quiet, relations between the two countries nosedived again in 2008, when a militant squad rampaged through the Indian city of Mumbai, killing 166 people.
India accused Pakistan of sheltering the masterminds behind the attack, charges that Pakistan denies.
The two countries have been slowly repairing relations in recent months.
In November, India executed a Pakistani man who was the last surviving perpetrator of the Mumbai attack.
Last month, the two countries signed a deal designed to ease visa restrictions for some citizens to travel between the two countries.