India has asked Canada to withdraw about 40 diplomatic staff from India, reports say, in a sharp escalation of a weeks-long crisis.
Those who stayed past 10 October would lose their diplomatic immunity, the Financial Times first reported.
Last month, Canada said India may have been behind the killing of a Sikh separatist leader on Canadian soil, which India has denied.
An Indian foreign ministry official told the BBC it had no comment to make.
Canadian Prime Minister Justin Trudeau told reporters on Tuesday he was not seeking to escalate the rift with India.
Tensions heightened between the two countries, which have historically had close ties, after Mr Trudeau said in September that India may have been behind the 18 June killing of Hardeep Singh Nijjar.
He was a Canadian citizen shot dead in his vehicle by two masked gunmen outside a Sikh temple in British Columbia.
India had designated him a terrorist in 2020.
Mr Trudeau told the Canadian parliament the country’s intelligence agencies were investigating whether “agents of the government of India” were involved in the killing of Nijjar.
While India denied the allegation, the foreign ministry later said it was willing to look at any specific information shared by Canada.
On 21 September, India stopped issuing visas to Canadian citizens citing “security threats” at its missions in Canada.
Foreign ministry spokesperson Arindam Bagchi also said India was looking for “parity in rank and diplomatic strength” between the diplomatic missions of the two countries.
“This is being sought because of Canadian diplomatic interference in our internal affairs,” he said.
Canada also announced it was reducing its personnel in India, saying some diplomats had received threats on social media.
“In light of the current environment where tensions have heightened, we are taking action to ensure the safety of our diplomats,” a statement said.
The US, UK and Australia have urged Delhi to cooperate with Canada’s investigation.
The Indian government has often reacted sharply to demands by Sikh separatists in Western countries for Khalistan, or a separate Sikh homeland. Nijjar vocally supported the Khalistan movement.
The movement which peaked in India in the 1980s with a violent insurgency centred in India’s Sikh-majority Punjab state was quelled by force.