Pakistan claims it has "credible intelligence" that India was planning an imminent military strike in response to the recent terrorist attack in Kashmir.
A news report by AFP says Pakistan has vowed to retaliate, as worries of spiralling conflict grew over the deadly attack in Kashmir.
Relations between the nuclear-armed neighbours have plummeted since New Delhi blamed its arch-rival Pakistan for last week's assault on tourists in Pahalgam in Indian-administered Kashmir, the deadliest attack on civilians there in a quarter of a century, added the news report.
AFP further reported citing a senior government source that Indian Prime Minister Narendra Modi has given the military "complete operational freedom" to respond to the attack during a closed-door meeting on Tuesday.
Pakistan's government has denied any involvement in the shooting, and information minister Attaullah Tarar said overnight that "any act of aggression will be met with a decisive response".
"Pakistan has credible intelligence that India intends to launch a military strike within the next 24 to 36 hours using the Pahalgam incident as a false pretext," AFP quoted Tarar as saying in a statement early on Wednesday.
Leaders around the world have expressed deep concerns and urged restraint by the uneasy neighbours who have fought several wars. Muslim-majority Kashmir, a region of around 15 million people, is divided between Pakistan and India but claimed in full by both nations, AFP reported.
About 1.5 million people live near the ceasefire line on the Pakistani side of the border, where residents were preparing for violence by readying simple, mud-walled underground bunkers reinforced with concrete if they can afford it.
"We are cleaning the bunker to ensure that if the enemy attacks at any time, we are not caught off guard and we can bring our children to safety," 42-year-old Muhammad Javed told AFP in the village of Chakothi.
According to AFP, India's military said on Wednesday it had repeatedly traded gunfire with Pakistani troops for a sixth straight night across the Line of Control (LoC), a heavily fortified zone of high-altitude Himalayan outposts that represents the de facto Kashmir border.
A Pakistan security source said troops responded to "unprovoked firing" overnight, while another security source told AFP that two drones were shot down on Tuesday near the LoC "after violating our airspace".
Since the Pahalgam attack there have been tit-for-tat diplomatic barbs, expulsion of citizens and border crossings shut, added the news report.
According to AFP, India and Pakistan have fought over the former princely state since their independence from British rule in 1947, with the border splitting generations of families.
Rebels in the Indian-run area have waged an insurgency since 1989, seeking independence or a merger with Pakistan.
The worst attack in recent years in Indian-run Kashmir was at Pulwama in 2019, when a suicide bomber rammed a car packed with explosives into a security forces convoy, killing 40 and wounding 35. Indian fighter jets carried out air strikes on Pakistani territory 12 days later, added the news report.
