The exchange of sweets took place at Chakan-da-Bag along the Line of Control (LoC) as a goodwill gesture, continuing a tradition that mark such occasions, officials here said.
At Suchetgarh on the international border, about 40 km west of Jammu, the Border Security Force and Pakistan Rangers also exchanged sweets.
India-Pakistan relations took a hit after New Delhi accused Pakistani troops of brutally killing two Indian soldiers along the LoC Dec 8 and beheading one of them.
Pakistan accused Indian troops of killing two Pakistani soldiers on two separate days.
In retaliation to the beheading and the mutilation of the other soldier, Indian Prime Minister Manmohan Singh declared that there can be no business as usual with Pakistan.
The Indian and Pakistani armies have been greeting each other on the LoC, which divides Jammu and Kashmir between the two countries, ever since a ceasefire came into effect in 2003.