India's home ministry said both suicide attackers had been "liquidated" in the raid. In a statement it said six people, including a policeman, had been hurt, none critically.
All of the two dozen passengers due to take Thursday's inaugural run to Azad Kashmir - most of whom were living in separate buildings at the rear of the complex because of earlier threats - escaped unharmed.
"God! Please don't let anyone else see such a horrible day!" wailed one distraught survivor as he ran away crying.
A policeman shot in the arm cried, "Please save me! Save me!" to colleagues as he lay on the ground outside, opposite a mosque and a popular park.
Indian Prime Minister Manmohan Singh was due to flag off the bus on Thursday morning. The government said he still would, along with ruling Congress party chief Sonia Gandhi. Pakistan, condemning the attack, said its service would also go ahead.
Four pro-freedom groups who had pledged to turn the first trans-Kashmir bus in half a century - seen as an emotional symbol of warming ties - into a coffin, told newspaper offices they had ordered the suicide raid.
"I saw two gunmen with AK-47s running from one side of the building to another," Aijaz Ahmed, a bank worker in the complex, told Reuters, after escaping through a window. Heat from the blaze as the building collapsed could be felt several hundred metres away, driving back hundreds of soldiers, police and journalists. Hundreds of people worked in the complex, which housed the state's tourism headquarters, a bank branch, an Indian Airlines office and railway and bus counters.
Within little more than half-an-hour, the yellowed, two-storey brick-and-timber building, made in the traditional Kashmiri steep-roofed style, was destroyed.
Indian television quoted Singh as describing the raid, which comes ahead of a visit to New Delhi by President Pervez Musharraf, as an "unfortunate development."
"These are desperate responses by those who don't want the dialogue to go ahead," he told NDTV. "We will not allow them to derail the dialogue and the peace process."
Pakistan expressed similar sentiments. "We express grave sorrow at this very unfortunate incident," Pakistan Foreign Minister Khursheed Mehmood Kasuri told reporters in Islamabad.
Twenty-two Indian passengers, who were housed at the complex, are now under guard at a secret base in Srinagar until their departure. Two other passengers were in Baramulla at the time of the attack.
Wednesday's attack was in one of Srinagar's most protected areas, near the chief minister's official residence and the government radio and television broadcasting offices.