The incident took place yesterday when the woman identified as Ushabai, a widow, demanded Rs 10 lakh from Bijouli village sarpanch Bahadur Singh, who had kept the money with him after selling her land sometime back.
The sarpanch kept the sum in his custody with the consent of the woman.
Later when Ushabai needed the money, the sarpanch started making excuses following which she started pressurising him in this regard.
Yesterday, the sarpanch along with his sons went to her place to settle the matter. When she did not relent,they poured kerosene over her and set her ablaze, police said.
Police later registered a case and arrested the sarpanch and his two sons in this regard while the remaining two are absconding.