The Army said that Indian troops resorted to "unprovoked firing" yesterday, targeting the civilian population in Rakhchikri area of Rawalakot.
As a result of the shelling, two civilians, including a woman, were killed while one person sustained injuries.
An army patrol assisting rescue operations in the area also came under fire, resulting in the killing of Naib Subedar Nadeem. Three soldiers were also injured, it said.
The Army claimed that Pakistani "troops gave a befitting response to the cross-border firing".