"Two girls and their brother died when mortar shells fired by Indian troops hit their house in Kotli district along the Line of Control (LOC)," Raja Arif Mehmodd, a local administration official, told AFP.
He said the eldest girl was aged 10 and the youngest girl aged five.
"All belonged to the same family," he added.
Meanwhile, the Pakistani military said Pakistan and Indian border troops exchanged fire across the Line of Control (LoC) in two other sectors on Saturday, the Inter-Services Public Relations (ISPR) said.
"Indian troops resort to unprovoked firing in Tander and Baroh areas of Bhimber sector today," said a statement issued by the military adding that no loss of life was reported in the latest exchange of fire.
On Friday, Pakistan's navy said it had "pushed" an Indian submarine away from Pakistani waters, as tensions between the nuclear-armed rivals continue to smolder over unrest in the disputed Kashmir region.
Tensions across the long-disputed de facto Himalayan border reached dangerous levels in September, when 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 militarized 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.