The sources said the soldier was handed back to China at the Chushul-Moldo border point in eastern Ladakh at 10.10 am.
The structure and the level at which the hotline would be set up is likely to come up for discussion in future meetings between the two countries at the military level, they said.
The Chinese aircraft have been regularly flying close to the LAC in the last three to four weeks which is seen as an attempt to probe the Indian defence mechanism in the area.
There was no official word on the outcome of the talks.
India and China held a special round of military talks on Tuesday at the Chushul-Moldo border meeting point in Eastern Ladakh to discuss air space violations and provocations by the Chinese side in that area in the last 45 days.
India and China will complete the disengagement process in the Gogra-Hotsprings area in eastern Ladakh by September 12, the External Affairs Ministry said on Friday.
India and China on Friday are holding another round of high-level military dialogue to resolve the 22-month-long standoff in some friction points in eastern Ladakh, two months after the last round of such talks failed to yield any significant outcome.
"India and China to hold Corps Commander-level talks on October 12 in the Eastern Ladakh sector to address the ongoing military standoff between the two countries. So far, the two sides have held six rounds of Corps Commander-level talks," the source said.
India is looking forward to a "constructive" dialogue with China to resolve issues in remaining friction points in eastern Ladakh, sources in the security establishment said on Monday ahead of the 14th round of military talks between the two sides on the 20-month row.
The Army is set to procure a fleet of light tanks for deployment in high-altitude areas in eastern Ladakh under 'Project Zorawar' to bolster its overall firepower and operational prowess to deal with any eventualities.
Through the past 18-month period, peace has prevailed in the disputed border regions, which was immensely helpful in the difficult situation that the country was passing through, observes Ambassador M K Bhadrakumar.
India recently outflanked China by taking control of strategic height near Pangong lake's southern bank.
A day after the nearly 12-and-half-hour talks, the two sides, in a joint statement on Monday, reaffirmed that the resolution of the pending issues would help in the restoration of peace and tranquility along the Line of Actual Control (LAC) in the region and enable progress in bilateral relations.
'Rezang La was a unique battle.' 'It was not a large scale battle like the Battle of Kohima which involved a large number of troops.' 'Here there was just a company that fought it out till the last man.'
The actions on the ground would be confirmed and are expected to be followed up soon.
'India is not the India of 1962. We are not carrying that baggage of history anymore.'
The talks till now have resulted in the resolution of issues in North and South Bank of Pangong Tso, Galwan and Gogra Hot Spring areas.
India and Chinese troops on Saturday exchanged sweets and greetings at 10 border posts along the Line of Actual Control (LAC) including in eastern Ladakh to mark the New Year, officials said.
The disengagement plan was discussed between the two sides during the 8th Corps Commander-level talks which were held on November 6 in Chushul.
The Indian Army said the soldier, a Corporal in the Chinese People's Liberation Army(PLA), has been identified as Wang Ya Long and he will be returned to the Chinese military at the Chushul-Moldo border point after completion of formalities.
India and China to hold the 11th round of corps commander-level talks at Chushul in eastern Ladakh at 10.30 am on Friday that is expected to focus on disengagement of troops in remaining friction points, sources within the Indian Army said.
The fresh round of Corps Commander-level talks took place at the Chushul-Moldo border point on the Chinese side of the Line of Actual Control in eastern Ladakh, they said.
Both countries have reached a mutual agreement for disengagement of troops from the most contentious area of North and South Pangong Lake.
A day after the nearly 13-hour meeting, the two sides in a joint statement on Saturday reaffirmed that such a resolution would help restore peace and tranquillity along the Line of Actual Control (LAC) in eastern Ladakh and facilitate progress in bilateral relations.
The sources said the Indian Army has been on a very high level of alert and is ready to deal with any eventuality in the area.
The Indian side is expected to seek disengagement as soon as possible in the remaining friction points besides pressing for resolution of issues in Depsang Bulge and Demchok.
The fresh round of Corps Commander talks are scheduled to start at 10:30 AM at Moldo border point on the Chinese side of the Line of Actual Control in eastern Ladakh, they added.
'We hope this round of meeting, on the basis of previous meetings, can move forward, further enlarge consensus, narrow differences and work for a solution that is acceptable to both parties,' the spokesperson said in updated comments posted on the ministry's website.
Indian Army Chief General M M Naravane had said on Wednesday that India was hopeful of resolving issues related to disengagement at Patrolling Point 15 (Hot Springs) in eastern Ladakh in the 14th round of talks.
The field commanders have also been told that while patrolling their respective areas of responsibility or accomplishing any task, there should not be any extra display of strength or overuse of force, government sources told ANI.
The remarks of White House Press Secretary Jen Psaki came ahead of the 14th round of military-level talks between India and China on the 20-month row in eastern Ladakh.
Since the June 15 clash, the PLA has inducted large numbers of troops, armoured vehicles and artillery along the LAC, from Depsang and Galwan in northern Ladakh to Hot Springs, Pangong Tso, and Chushul in central Ladakh, to Demchok and Chumar in southern Ladakh.
The deployment of strategic bomber aircraft is also still on by the Chinese
The army said senior commanders of the Indian and Chinese military reviewed the progress on implementation of the first phase of disengagement and discussed further steps to ensure complete withdrawal of troops in the region.
The effort made to define the larger picture by focussing on history and the wish not turn differences into disputes and conflicts is welcome. In the obtaining circumstances today, nothing more could have been possible, observes Ambassador T P Sreenivasan.
The two sides have also agreed for a joint mechanism to verify the progress in the disengagement process through delegation meetings as well as using unmanned aerial vehicles.
The statement of Commander of US Indo-Pacific Command Admiral John Aquilino on Wednesday came ahead of the 15th round of high-level military talks between India and China on March 11.
The 11th round of the Corps Commander-level talks began at around 10.30 am at the Chushul border point on the Indian side of the Line of Actual Control (LAC) in eastern Ladakh, they said.
Corps Commander-level meeting between armies of India and China was held in Chushul on Tuesday, to resolve the ongoing dispute over Chinese aggression along the Line of Actual Control (LAC) in Eastern Ladakh area, said Indian Army Sources.
India, China have agreed to hold another round of talks soon.