The bus carrying over a dozen school children and a woman caretaker plunged into the river near Aldona ferry wharf. The driver and conductor jumped out of the vehicle as it fell into the river.
Officials said seven bodies have been fished out of the river and the number of casualties are likely to rise.
Soon after the mishap, rescue operations were initiated with the help of local and marine police, Indian Navy, Indian coast guard and the Indian army following which three Chetak helicopters and 10 divers assisted with canoes by locals managed to extricate seven persons almost two hours after the accident.
The vehicle was pulled out of the river and searches are on to trace the missing children who are feared drowned, Director General of Police Kishan Kumar said.
In view of the tragedy, the Goa government cancelled all carnival float parades on Saturday and announced a compensation of Rs. two lakh for families of the dead.