Kashmiri leaders called India Republic celebrations "black day" as the country marks the event under heavy security measures.
Tanks rolled and fighter jets roared above India's main ceremonial avenue in an annual Republic Day military parade on Tuesday, hours after Indian and Pakistani troops exchanged heavy fire in the disputed Kashmir region.
Kashmiris on both sides declared Indian Republic Day "as Black Day", pro-independence leaders said, including Mirwaiz Umar Farooq and veteran Kashmiri Hurriyet leader, Syed Ali Gilani.
Kashmiris say "India's continued denial of Kashmiris' right to self-determination" was contrary to its claim of being a democratic republic.
In occupied Kashmir, all business establishments, government and private offices, banks and courts remained closed while traffic was off the road, Kashmiri Media Service reported.
"All mobile networks stopped working this morning. There was no signal on mobile phones of private service providers," the report said.
India celebrates its Republic Day on Jan. 26 every year, but this year security measures were notched up following western intelligence reports of a "possible terrorist attack".
In Srinagar, capital of Indian-held Kashmir, hundreds of young men protested Indian rule, chanting "We want freedom" and "Indian forces leave Kashmir."
Police fired tear gas and swung batons to disperse the demonstrators.
More than a dozen groups have fought Indian forces since 1989, seeking independence for the Muslim-majority state or its merger with Pakistan.
Cities, railways and airports in many parts of the country stepped up vigilance while troops were a visible presence on the streets of the capital New Delhi ahead of an annual parade to showcase India's military strength and culture.
Last week, the Indian government put its airports on high alert amid reports that "militants planned to hijack a plane". Security has also been tightened at all major government telecommunications and power installations, police said.
In New Delhi, thousands of police and soldiers lined the 8-km route of the military parade as chief guest South Korean President Lee Myung-bak joined his Indian counterpart Pratibha Patil in a bullet-proof stand for Republic Day celebrations.
The day marks the adoption of a republican constitution after independence from Britain in 1947.
In a ceremony showcasing the country's military strength, tanks and armoured cars rolled by, fighter jets roared through a misty winter sky in a full fly-past and helicopters hovered overhead, showering the crowd of thousands with rose petals.
"There is no specific alert from intelligence agencies but we are on high alert anyway," D. Sivanandan, the Mumbai Police Commissioner, told Reuters.
"There will be policemen patrolling all over the city, including iconic structures, high rises, parade grounds, etc."
India is observing the 60th anniversary of the 1950 adoption of its constitution.
The border firing began shortly after midnight.
A spokesman for Indian border guards said Pakistani troops fired to provide cover to pro-independence fighters..
But a Pakistani security official said Indian forces used automatic weapons and mortar bombs in unprovoked firing that hit Bijhwat village near the Pakistani city of Sialkot.
"Our troops retaliated with full force, also using heavy weapons, which ended the Indian firing that lasted for about half an hour," spokesman Nadeem Raza said. No casualties were reported.
In 1948, the United Nations adopted a resolution calling for a referendum for Kashmir to determine whether the Himalayan region should be part of India and Pakistan. Kashmiris say fight against India since it rejected to hold referendum in Kashmiri territory.