At least 10 people, including three armed militants, died in a 12-hour firefight with Indian security forces in northern Punjab province yesterday.
Police said the attackers, dressed in Indian Army fatigues, stormed a police station at dawn in the small agricultural town of Dinanagar, 15km from the border with Pakistan, and fortified themselves inside it.
For the rest of the day, until about 5pm local time, the heavily armed militants exchanged automatic fire with the security forces that encircled them.
Quick Reaction Teams of the Indian Army were present at the siege, but officials were unable to confirm whether they were actively employed against the militants.
Punjab police chief Sumedh Singh Saini said the attackers hijacked a car and then fired indiscriminately at a bus and a roadside eatery, before killing a barber and attacking and seizing the police station.
Seven locals were killed in the incident, including a senior police detective, and nine others were injured, seven of who were in serious condition in hospital. Assault rifle fire echoed across the paddy fields surrounding the Dinanagar police station throughout the day.
Police claimed the siege was deliberately prolonged, as they wanted to capture one of the terrorists alive, but they were unable to do so as the attackers were suicide terrorists.
Five live bombs, reportedly planted by the militants, were also recovered from nearby rail tracks, forcing all train services to the region to be cancelled.
Security and intelligence officials believe the gunmen entered the troubled state of Jammu and Kashmir from Pakistan some days ago, before moving on to neigbouring Punjab, in an attempt to try to reignite violence there after a hiatus of nearly two decades.
Security officials said GPS devices had been recovered from the terrorists, indicating that they were well equipped and working to a pre-determined plan.
A Sikh separatist movement operated in Punjab for nearly 13 years until 1993 in a campaign of violence in which over 50,000 people died and which India claimed was "sponsored" by nuclear rival Pakistan.
Pakistan denied India’s allegations, though over the past two decades some of its senior leaders have tacitly admitted to offering financial and material assistance to Sikh separatist leaders in securing an independent homeland.
India's prime minister Narendra Modi and his senior ministers have not made any detailed statements on yesterday's attack, which is almost certain to raise tensions with Pakistan, if it is proven to have originated across the border. A statement from the government is expected in parliament today.
Junior minister Jitendra Singh, an MP from the Jammu region that borders the area where the terrorist strike took place, did not rule out Pakistan's involvement. "There have been earlier reports of Pakistan infiltration and cross-border mischief in this area," Mr Singh said, but did not elaborate.
Interior minister Rajnath Singh ordered increased security on the border with Pakistan.