Canada has expelled an Indian diplomat as it was investigating what Prime Minister Justin Trudeau called "credible allegations" of the involvement of "agents of the Indian government" in the killing of a Sikh extremist leader in Surrey in June, claims outrightly rejected by New Delhi as "absurd" and "motivated".

Hardeep Singh Nijjar, 45, the chief of the banned Khalistan Tiger Force (KTF) and one of India's most-wanted terrorists who carried a cash reward of Rs 10 lakh on his head, was shot dead by two unidentified gunmen outside a gurdwara in Surrey in the western Canadian province of British Columbia.

"Over the past number of weeks, Canadian security agencies have been actively pursuing credible allegations of a potential link between agents of the Government of India and the killing of a Canadian citizen, Hardeep Singh Nijjar," Trudeau said Monday in a speech to the House of Commons.

After Trudeau’s remarks in Parliament, Canadian Foreign Minister Melanie Joly confirmed that she has ordered the expulsion of "a senior Indian diplomat." Reacting sharply to the allegations and Joly’s remarks, India on Tuesday rejected Trudeau’s claims, calling them "absurd and motivated". The Ministry of External Affairs (MEA) has also asked a Canadian diplomat to leave India within the next five days.

"Allegations of the Government of India's involvement in any act of violence in Canada are absurd and motivated," the MEA said in a statement in New Delhi.

"Similar allegations were made by the Canadian Prime Minister to our Prime Minister, and were completely rejected," it said.

"We are a democratic polity with a strong commitment to the rule of law," the MEA said.

"Such unsubstantiated allegations seek to shift the focus from Khalistani terrorists and extremists, who have been provided shelter in Canada and continue to threaten India's sovereignty and territorial integrity," it said.

"The inaction of the Canadian Government on this matter has been a long-standing and continuing concern," the ministry said.

The MEA said Canadian political figures have "openly expressed sympathy for such elements remains a matter of deep concern”.

"The space given in Canada to a range of illegal activities including murders, human trafficking and organised crime is not new," the MEA said.

"We reject any attempts to connect the Government of India to such developments," it said.

"We urge the Government of Canada to take prompt and effective legal action against all anti-India elements operating from their soil," it added.

In his speech, Trudeau told the lawmakers that any involvement of a foreign government in killing a Canadian citizen on Canadian soil is “an unacceptable violation of our sovereignty.” "It is contrary to the fundamental rules by which free, open and democratic societies conduct themselves,” he said.

"As you would expect, we have been working closely and coordinating with our allies on this very serious matter," he added.

He also disclosed that he had raised with Prime Minister Narendra Modi the issue during their meeting on the sidelines of the G20 summit in New Delhi earlier this month.

Trudeau urged the Indian government to "cooperate with Canada to get to the bottom of this matter." During the bilateral meeting with Trudeau on September 10, Prime Minister Modi conveyed India's strong concerns about continuing anti-India activities of extremist elements in Canada as they are promoting secessionism, inciting violence against Indian diplomats and threatening the Indian community there.

The Canadian foreign minister's office identified the expelled Indian diplomat as Pavan Kumar Rai, the head of India's foreign intelligence agency in Canada, the Toronto Star newspaper reported.

"My expectations are clear. I expect India to fully collaborate with us and get to the bottom of this," Joly said.

Citing a senior government source, CBC News reported that Trudeau has briefed the leaders of some of Canada's closest allies about the case, including US President Joe Biden, British Prime Minister Rishi Sunak and French President Emmanuel Macron.

Conservative Leader Pierre Poilievre said Canadian citizens "must be safe from extrajudicial killings".

"Canadians deserve to be protected on Canadian soil. We call on the Indian government to act with utmost transparency as authorities investigate this murder. The truth must come out," Poilievre said.

New Democratic Party leader Jagmeet Singh said that he'd use "every tool" at his disposal to "bring those responsible to justice." "We will ensure that no rock is unturned, that every possible link is examined," Singh said, adding that the public inquiry into foreign interference, which was prompted by allegations of Chinese meddling, should also look at India and its actions in Canada.

Public Safety Minister Dominic LeBlanc said the Royal Canadian Mounted Police (RCMP) is leading the murder investigation.

"We'll hold the perpetrators accountable and bring them to justice," he said.

The Mounties' Integrated Homicide Investigation Team (IHIT) is responsible for the Nijjar file.

"It's progressing," RCMP Commissioner Mike Duheme told CBC News when asked about the investigation.

Canada-based Nijjar was designated a 'terrorist' by India under the stringent Unlawful Activities (Prevention) Act in July 2020 and his property in the country was attached by the National Investigation Agency (NIA) in September 2020.

Interpol Red Corner Notice was also issued against him in 2016. The local police of Surrey had also put Nijjar under house arrest temporarily in 2018 on suspicion of his terror involvement but he was released later.

Canada has a Sikh population of more than 770,000 (about 2 per cent of its total population).

Bilateral ties between India and Canada have been tense in recent months. Trade talks have been derailed and Canada just cancelled trade talks.

Last week, a senior official said in New Delhi that negotiations for a free trade agreement between India and Canada will resume after the resolution of political issues between the two countries.

"There were certain political developments in Canada on which India has raised its objections. India has shown a strong resentment against certain political developments in Canada, and therefore, for the time being, till these political issues are settled, we have paused the negotiations," the official said in New Delhi.