The woman, Neetu, sprinkled kerosene on 12-year-old daughter Divya and 4-year-old son Kanha and set them on fire, following which she herself ablaze, they said.
According to the police, a local youth, identified as Banti, had been troubling and spreading rumours about the woman to harm her image.
Her husband had also committed suicide by hanging himself last week over the issue, police said.
Police is on the lookout for the youth and the bodies have been sent for post-mortem, they said.
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