A suspected terror attack is underway in India's Punjab state after several gunmen dressed in security uniforms, stormed a police station in Gurdaspur.

At least seven police officers, two prison inmates and one of the assailants were killed in the attack. The army has been drafted in to deal with the situation and helicopters are swirling around the area.

The troops are engaged in a gunfight with the attackers even as live bombs have been found. Security has also been heightened in the India-Pakistan border region after the Indian government hinted at Pakistan's hand in the incident.

India's Home Minister Rajnath Singh tweeted: "Spoke to DG BSF Shri DK Pathak and instructed him to step up the vigil on India-Pakistan border in the wake of attack in Gurudaspur."

"The MHA [Ministry of Home Affairs] is monitoring the situation in Gurudaspur and Punjab. I am confident that the situation will be soon brought in control."

Prime Minister Narendra Modi is heading a high-profile security meeting, attended by the defence minister and top intelligence officials. The government is set to make a statement in the parliament shortly. Intelligence officials suspect the attack bears the hallmark of the Islamist group, Lashkar-e-Taiba (LeT).

"We suspect ISI is behind the attack. There seems to be no involvement of local terrorists," the ruling party's spokesperson in Punjab, Naresh Gujral said.

Gurdaspur town is located near the Jammu and Kashmir state, where the nuclear-armed rivals are engaged in a decades-long quarrel. Punjab has had its own bitter domestic insurgencies.