India has expelled a senior Canadian diplomat in a tit-for-tat response after Ottawa accused India of links to the killing of a Sikh activist in Canada and ordered an Indian diplomat to leave.

In a statement, India's Ministry of External Affairs wrote that "the decision reflects Government of India's growing concern at the interference of Canadian diplomats in our internal matters and their involvement in anti-India activities".

Earlier, Canada expelled a top Indian diplomat amid investigations into what Prime Minister Justin Trudeau called credible allegations that India's government may have had links to the assassination of a Sikh activist.

Trudeau said in parliament on Monday that Canadian intelligence agencies have been looking into the allegations after Sikh leader Hardeep Singh Nijjar, a strong supporter of an independent Sikh homeland known as Khalistan, was gunned down on June 18 outside a Sikh cultural centre in Surrey, British Columbia.

Trudeau said he brought up the slaying with Indian Prime Minister Narendra Modi at the G20 last week. He said he told Modi that any Indian government involvement would be unacceptable and that he asked for co-operation in the investigation.

Canadian Foreign Minister Mélanie Joly said the head of Indian intelligence in Canada has been expelled as a consequence.

"If proven true this would be a great violation of our sovereignty and of the most basic rule of how countries deal with each other," Joly said.

"As a consequence we have expelled a top Indian diplomat."

Trudeau said Canada has declared its deep concerns to the Indian government. 

"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.

"Any involvement of a foreign government in the killing of a Canadian citizen on Canadian soil is an unacceptable violation of our sovereignty."

Trudeau said his government has been working closely and co-ordinating with Canada's allies on the case.

"In the strongest possible terms I continue to urge the government of India to co-operate with Canada to get to the bottom of this matter," he said.

Trudeau said he knows there are some members of the Indo-Canadian community who feel angry or frightened, and he called for calm.

Public Safety Minister Dominic LeBlanc said Canada's national security adviser and the head of Canada's spy service have travelled to India to meet their counterparts and to confront the Indian intelligence agencies with the allegations.

He called it an active homicide investigation led by the Royal Canadian Mounted Police.