Indian soldiers stormed a house in a remote village in Kashmir on Tuesday, killing two rebels holed up in the building hours after the militants released 12 hostages sent to help negotiate their surrender.

A police spokesman said troops used mortar bombs to bring down the house near Shopian, south of the state's main city, Srinagar, where the villagers had been held hostage since Monday morning.

"The hostages came out after security forces fired teargas shells into the house in the morning," the spokesman told Reuters.

"After the civilians came out, soldiers stormed the building and shot dead two militants. Search operations are still going on for any more militants."

Separatist violence has surged in Jammu and Kashmir despite tentative peace moves between India and Pakistan, who have fought two wars over the region since winning independence from Britain in 1947.

Police said soldiers also shot dead nine militants in separate gunbattles across the Himalayan region where more than 38,000 people have died in 14 years of rebellion.

New Delhi accuses Islamabad of sponsoring Islamic guerrillas fighting India's rule in Kashmir, a charge Pakistan denies.

The nuclear-armed South Asian rivals stood on the brink of war last year over Kashmir, and India wants a halt to violence there before talks.

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