"We deny the Indian allegation of unprovoked firing," a military spokesman said in a brief reaction carried by news agencies.
The Indian account was "propaganda" to divert the attention of the world from Sunday's raid on a Pakistani post, he said.
Earlier, the Indian Defence Ministry termed the killing of two of its soldiers by Pakistan Army as a "provocative action" and said the matter will be taken up with Islamabad.
"The Government of India considers the incident as a provocative action and we condemn it. Directors General of Military Operations (DGMOs) of the two countries are in touch over it. We expect Islamabad to honour the ceasefire agreement strictly," the Defence Ministry said in a statement.
In a gruesome attack, Pakistani regular soldiers crossed into Indian territory in Poonch sector of Jammu and Kashmir today and ambushed an Indian patrol killing two soldiers, one of whom was decapitated.