Village elder Akhtar Hussain and five members of his family were shot at point-blank range in the attack in Chittabas village in a thickly forested area 160km north of Jammu, the winter capital of Jammu and Kashmir state, said Senior Superintendent of Police Shakil Baig.
"This is the work of terrorists," Baig said. He was referring to the dozen-odd Islamic groups, some Pakistan-based, fighting Indian security forces in the state since 1989 to carve out a separate homeland or merge the Himalayan region with Pakistan.
No one immediately claimed responsibility for the slaying.
More than 66,000 people have been killed in the conflict.
Muslim families are directly targeted in Kashmir by fighters when they are suspected of being informers for security forces, officials say.
But civilians form the bulk of those who have died in Kashmir in the past 16 years, killed in crossfire, bombings, and at the hands of both the separatists and security forces, according to human rights groups.
India accuses Pakistan of aiding and arming the fighters at training camps on the Pakistani side of Kashmir - a charge Islamabad denies.
Both India and Pakistan claim the divided Himalayan region in its entirety and have fought two wars over it.
India's Home Minister Shivraj Patil said on Monday that attacks in Kashmir were down. Patil said there had been a 60% reduction in infiltration of separatists into Indian Kashmir, and a 40% reduction in casualties.
More than 66,000 people have
died in the Kashmiri conflict
However, Kashmir's top army commander said on Tuesday that incursions by guerrillas had intensified this month.
"There has been a spurt in the infiltration by militants across the Line of Control in the past 10 days or so," Lieutenant-General S S Dhillon said in Srinagar, the summer capital of Jammu and Kashmir.
Dhillon said that although the attempts by suspected separatists to cross over into Indian Kashmir had been foiled by the army, intelligence reports suggested that a large number of them were waiting to cross the ceasefire line that divides Kashmir between the two countries.
"I would like to state that I am certain that the Pakistani army is not unaware of the infiltration, but I cannot say how actively they support it," Dhillon said.
During the past week, the Indian Army has killed at least 30 suspected fighters at various places along the frontier in Kashmir.
Meanwhile, fighting between the Indian Army and intruders from the Pakistani side continued for the seventh day on Tuesday.
At least 12 suspected separatists have been killed so far, Dhillon said.
The fighting erupted last Wednesday after about 35 of them sneaked into Indian territory through a remote, snowbound mountain pass.