The government was weighing its options on whether "limited exposure" by going for a meeting would end Pakistan's chances of exploiting its constant refrain that India does not have a positive outlook.
Pakistan's Ministry of Foreign Affairs in a formal statement described the comments about Khan as "most unfortunate" and "against all norms of civilized discourse and diplomatic communication".
Pakistan has said that it is "deeply disappointed" with India's decision to cancel Foreign Minister talks.
The foreign ministry in New Delhi said its decision to scrap the meeting was to protest the killing of Indian security personnel in Kashmir and a Pakistani postage stamp it said was "glorifying" an anti-India separatist who Indian forces killed in the disputed Himalayan region previous year.
Announcing the cancellation of the meeting, External Affairs Ministry spokesperson Raveesh Kumar said in New Delhi that the incidents "exposed" the "true face" of Pakistan's new Prime Minister Imran Khan to the world as well as Islamabad's evil agenda behind the proposal for talks.
As well as the killing of an India soldier in Kashmir, officials raged at the release of 20 postage stamps containing the image of Burhan Wani, a militant killed by India in 2016.
India had earlier accepted Khan's request for a meeting between External Affairs Minister Sushma Swaraj and her Pakistani counterpart Shah Mahmood Qureshi on the sidelines of the United Nations General Assembly in NY this month. India accuses Pakistan of arming and training the insurgents, a charge Pakistan denies.
Expressing disappointment at India's decision to cancel the dialogue on the sidelines of UNGA, Pakistan Prime Minister Imran Khan took to Twitter and said that India's response to his resumption of peace dialogue was "arrogant and negative".
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The foreign minister responded to the cancellation by saying India had "priorities apart from dialogue".
Highly placed sources have told India Today TV that Prime Minister Narendra Modi himself reviewed the decision on talks.
He went on to say that if India doesn't want dialogue, then Pakistan also won't be in a haste either.
Indian government had revoked its decision to accept Pakistan's proposal for a meeting between the Foreign Ministers on the sidelines of UNGA in NY.
The minister had said Pakistan can only wish that India comes to the negotiating table, but "we can neither pressurise anybody nor will accept the same for this goal".
High-level talks between India and Pakistan are rare.
"Time and again we have said atmosphere in the region is not conducive for a summit".