Fighters have carried out an attack in Indian-administered Kashmir which killed at least three civilians and a policeman, the latest violence to hit the valley, according to authorities.

They said one of the fighters was also killed while attacking policemen clearing the site of a road accident late on Saturday near Kulgam district.

"A police party was at the accident site when they were attacked. In the crossfire, one policeman and three civilians died. One of the attackers also died," a police source told the AFP news agency on Sunday.

S P Pani, senior police officer, confirmed that a police unit came under fire on Saturday night as it reached a road accident site on a key highway connecting the valley with the rest of India.

He said the dead civilians included road construction officials of a private company.

Police believe two of the attackers escaped under the cover of darkness after the officers retaliated in Malpora, a village 65km south of Srinagar, the main city in Indian-administered Kashmir.

In the same Kulgam district, five Indian policemen and two civilians were killed when fighters attacked a bank van, and two soldiers were killed in an attack along the de facto border with Pakistan.

And on Sunday, thousands of local residents gathered to mourn the dead separatist fighter at a funeral where his comrades fired shots into the air as a mark of respect.

In another Kashmir-related development, Pakistan's army said Indian troops shot and wounded at least four Pakistani villagers.

A military statement said the troops committed a ceasefire violation when they fired without provocation late on Saturday from near the UN-monitored military control line near the border between the two countries.

The statement said the Indians also targeted civilians in the village of Thruti with mortars, and that Pakistani troops returned fire.

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Anti-India sentiment runs deep in the predominantly Muslim Kashmir valley, one of the world's most heavily militarised areas.

The clashes have become more frequent since the killing last July of Burhan Wani, the popular commander of a separatist armed group.

Kashmir has been divided between India and Pakistan since the end of British rule in 1947 but both claim the territory in its entirety.

Separatist groups have for decades fought the roughly 500,000 Indian soldiers deployed in the region, demanding independence or a merger of the entire territory with Pakistan.