Pakistan is preparing international legal action over India's suspension of a key river water-sharing treaty, a government minister told Reuters, as tensions intensify between the neighbours following an attack on tourists in India-administered Kashmir.

Minister of State for Law and Justice Barrister Aqeel Malik told Reuters late on Monday that Islamabad was working on plans for at least three different legal options, including raising the issue at the World Bank - the treaty's facilitator.

It was also considering taking action at the Permanent Court of Arbitration or at the International Court of Justice in the Hague where it could allege that India has violated the 1960 Vienna Convention on the Law of Treaties, he said.

"Legal strategy consultations are almost complete," Malik said, adding the decision on which cases to pursue would be made "soon"and would likely include pursuing more than one avenue.

India's water resources officials did not immediately respond to a request seeking comment.

India last week suspended the World Bank-mediated Indus Waters Treaty of 1960 after the attack in Kashmir, saying it would last until "Pakistan credibly and irrevocably abjures its support for cross-border terrorism".

Islamabad denies any involvement in the attack in which 26 people were killed.

India says two of the three suspected attackers it had identified were from Pakistan. Islamabad has said "any attempt to stop or divert the flow of water belonging to Pakistan ... will be considered as an act of war". Pakistan has also suspended all trade with India and closed its airspace to Indian airlines.

The treaty is an agreement for the distribution and use of waters from the Indus River and its tributaries, which feed 80% of Pakistan's irrigated agriculture and its hydropower. It has been operational until now despite the wars and other periodic bouts of hostility between the two nations.

Malik added that a fourth diplomatic option that Islamabad was considering was to raise the issue at the United Nations Security Council.

"All the options are on the table and we are pursuing all appropriate and competent forums to approach," he said.

"The treaty cannot be suspended unilaterally and cannot be held in abeyance, there is not (such a) provision within the treaty," said Malik.

Kushvinder Vohra, a recently retired head of India's Central Water Commission said: "There are very limited options (for Pakistan) ... I can say that there are solid grounds for us to defend our (India's) action."

Government officials and experts on both sides say India cannot stop water flows immediately, because the treaty has allowed it to only build hydropower plants without significant storage or dams on the three rivers allocated to Pakistan.