India on Tuesday rejected Chinese allegations that its forces had crossed a disputed border and fired warning shots.
It accused Chinese troops of the action during a new border face-off.
This will be the first time in more than four decades that shots have been fired in the contested Himalayan region of Ladakh, breaking an agreement barring the use of firearms.
No casualties were reported.
Ties between the nuclear-armed Asian giants have steadily deteriorated since the neighbours have been locked in a tense stand-off in the high-altitude region since May.
China’s western military command in a statement late Monday night said the Indian incursion occurred along the Shenpao Mountain area on the southern bank of Pangong Lake on Monday.
After the Indian army fired the shots, the statement said, Chinese forces took “countermeasures to stabilise the situation,” although it was not clear what these were.
It demanded that the Indian forces withdraw and “strictly investigate and punish the person who fired shots.”
India’s actions “seriously violated relevant agreements, pushing up regional tensions … They are serious military provocations and are of a very bad nature,” the statement citing spokesman Zhang Shuili said.
But in its response on Tuesday, New Delhi said Chinese forces had closed in on Indian positions and fired shots in the air, accusing Beijing of trying to mislead its domestic and international audience.
The Indian army maintained that at no stage had its soldiers crossed the Line of Actual Control (LAC), a de-facto border, or resorted to any aggressive means, including firing.
“It is the (Chinese army) that has been blatantly violating agreements and carrying out aggressive manoeuvres, while engagement at the military, diplomatic and political level is in progress,” army spokesman Colonel Aman Anand said.
He said the Indian army was “committed to maintaining peace,” but it was also “determined to protect national integrity and sovereignty at all costs.”
Ladakh was the scene of hand-to-hand combat between Indian and Chinese soldiers in June in which 20 Indian soldiers were killed.
It was the worst border confrontation between the neighbours in 45 years.
China did not confirm any casualties.
Indian media reported that Indian troops had recently gained a tactical advantage by occupying heights in the Pangong Lake region, another flashpoint in Ladakh, to foil Chinese attempts to carry out incursions into Indian territory.
Monday’s flare-up comes after the Indian military this weekend alerted Chinese officials over reports that five Indian civilians were abducted by Chinese troops from another disputed border section in Arunachal Pradesh, in the eastern Himalayas.
The countries have held military and diplomatic talks between representatives since then to disengage and withdraw troops, but the deadlock has not been resolved.
Indian Foreign Minister Subrahmanyam Jaishankar is expected to meet his Chinese counterpart, Wang Yi, in Moscow on the sidelines of a Shanghai Cooperation Organization meeting on Thursday.
India and China fought a brief border war in 1962 and dispute several sections along their ill-defined, 3,500-kilometre border.
India disputes China’s rule over 38,000 square kilometres of land in Aksai Chin, which it claims to be part of Ladakh region.
China has laid claims to 90,000 square kilometres of territory in Arunachal Pradesh, which it says is part of southern Tibet.