A civilian died when mortar rounds and artillery shells fired by Pakistani troops from across the border hit villages in the Indian-administered sector, Indian police said on Friday.
Indian troops said they returned the fire "effectively".
Indian officials said that Pakistani shelling in the north-western Tangdar sector damaged a local telephone exchange, a school building, three shops and four houses.
Police said residents took refuge in underground bunkers and ground floors of their houses.
Indian and Pakistani troops frequently trade fire power along the border. At least 38 civilians and 27 security force personnel have died in border skirmishes between January and 15 September.
Meanwhile, Indian security forces claimed to have shot dead three Kashmiri fighters during a 10-hour gun battle, which started late on Thursday in Kupwara district.
"The fighting erupted when Indian troops ringed the area on a tip-off," army spokesman Colonel Mukhtair Singh said.
"All three militants holed up in the area were killed," he said.
Three more Kashmiri fighters were killed in northern Baramulla district, after soldiers closed in on their hideout.
The police further said suspected Kashmiri fighters had killed three Muslims in the state overnight and on Friday.
One of the victim was a member of a pro-government militia.