Defence ties between China and India have remained tentative due to long standing disputes and a lack of trust, the fought a short war in 1962.
Beijing refused a visa to an army general from the Indian occupied Kashmir (Iok), government sources and local media said on Friday.
New Delhi would give little details on the issue, only saying that the visit by the general to China did not take place.
"While we value our exchanges with China, there must be sensitivity to each others' concerns. Our dialogue with China on these issues is ongoing," India's foreign ministry spokesman said in a statement.
Last year, India protested against a Chinese embassy policy of issuing different visas to residents of Indian Kashmir, one of a series of low-level disputes between the Asian giants.
Last year, India protested against the Chinese practice of issuing visas to Kashmiris on separate pieces of paper, unlike the standard visas it offered to other Indians.
The disputed status of Kashmir has been behind two of the three wars between India and Pakistan; the two countries each administer part of Kashmir but claim the territory in full.
China maintains that part of Kashmir should be in Tibet, which it claims.
A separatist insurgency in Kashmir has killed tens of thousands of people since it began in 1989.
India and China have never been close, but of late they have become engaged in increasingly sharp rounds of diplomatic thrust and parry. In September, India signaled its approval of a planned visit by the Dalai Lama to the border town of Tawang, the site of a famous Tibetan Buddhist monastery — a move that China interpreted as a provocation. Beijing then objected to a visit by Manmohan Singh, the Indian Prime Minister, to Arunachal Pradesh, claiming it was part of Tibet, which belongs to China. Outraged that China presumed to tell an Indian leader not to go to territory legally recognized as India's, New Delhi then objected to a new power plant that China is building in Pakistani-controlled Kashmir, territory that India claims. Almost no one expects this year's harsh words to escalate into military action, but the hostility is real. "China is trying to see how far India can be pushed.