There have been repeated outbreaks of cross-border firing, with both sides reporting deaths and injuries including of civilians.
The incident came a day after India said three of its soldiers had been killed by Pakistani troops and threatened "retribution", a claim that was angrily rejected by Pakistan.
Wednesday's violence took place in Nagdar village in Pakistani-held Kashmir's scenic Neelum Valley.
Local administration official Sardar Waheed said firing was continuing, preventing ambulances from reaching the scene.
"Indian troops targetted a civil Bus near LoC (the Line of Control) in Neelam (sic) valley," the military said in an emailed statement. In a separate statement it said that "intense firing" was ongoing.
"The death toll in the bus firing is nine now," Neelum Valley police chief Jamil Mir told AFP.
"At least nine people have been killed and seven others wounded," the speaker of Pakistani Kashmir's legislative assembly, Shah Ghulam Qadir, told a press conference in Muzaffarabad.
He accused India of "deliberately targeting" civilians.
On Tuesday the Indian army accused Pakistan of sending soldiers across the LoC, the de facto border that divides Kashmir, and killing three of its soldiers, adding that one of the bodies had been "mutilated".
But Pakistan angrily rejected the claim in a series of tweets from a foreign ministry spokesman late Tuesday, calling it "baseless" and a "fabrication".
Tensions in the long-disputed Himalayan region reached dangerous levels in September, after India blamed Pakistani militants for a raid on an army base that killed 19 soldiers.
India said it had responded by carrying out "surgical strikes" across the heavily militarised border, sparking a furious reaction from Islamabad, which denied the strikes took place.
There have since been repeated outbreaks of cross-border firing, with both sides reporting deaths and injuries including of civilians.
Kashmir has been divided between India and Pakistan since the end of British colonial rule in 1947. Both claim the Himalayan territory in full and have fought two wars over the mountainous region.
Several rebel groups have for decades fought Indian soldiers for independence for the region or its merger with Pakistan. The conflict has killed tens of thousands of people, mostly civilians.