The two neighbors regularly fire potshots over the Line of Control (LoC) in the disputed Himalayan territory, which is divided between them and poisoned their relations since independence in 1947.
But the latest exchange follows India's decision this month to rip up the special constitutional status of its part of Kashmir, sparking protests from the local population, outrage from Pakistan and unease from neighboring China.
"The exchange of fire is going on," a senior Indian government official told AFP, calling it "heavy."
One Indian soldier was reportedly killed. Pakistan made no immediate comment on the violence.
Late Friday, Pakistan and China succeeded in getting the UN Security Council to discuss Kashmir – behind closed doors – for the first time since the Indo-Pakistan war of 1971.
Pakistani Prime Minister Imran Khan on Saturday hailed the gathering, saying that addressing the "suffering of the Kashmiri people & ensuring resolution of the dispute is the responsibility of this world body.”
New Delhi insists the status of the territory is a purely internal matter.
"We don't need international busybodies to try to tell us how to run our lives. We are a billion-plus people," India's UN envoy Syed Akbaruddin said after the meeting.
India on Saturday meanwhile gradually restored phone lines following an almost two-week communications blackout in its part of Kashmir, imposed hours before Prime Minister Narendra Modi's surprise August 5 gambit.
Seventeen out of around 100 telephone exchanges were restored Saturday in the restive Kashmir Valley, the local police chief said.
But mobiles and the Internet remained dead in the Muslim-majority Kashmir valley, the main hotbed of resistance to Indian rule in Jammu and Kashmir state in a 30-year-old conflict that has killed tens of thousands.
Fearing an angry and potentially violent response, India also sent 10,000 extra troops to the area, severely restricted movement and arrested some 500 local politicians, activists, academics and others.
The state's Chief Secretary BVR Subrahmanyam had said Friday there would be a "gradual" restoration of phone lines over the weekend, with schools to resume classes in some areas next week.