Police and witnesses said about 2000 protesters took to the streets in the town of Handwara, 85km north of the summer capital Srinagar, demanding action against soldiers involved in the alleged rape.
The demonstrators shouted anti-government slogans and chanted, “We want justice” and “Book the culprits.”
They alleged that the pair were raped in the neighbouring village of Bhaderwain overnight after male members of the family were ordered out of the house on the pretext of the soldiers wanting to search the premises.
Army spokesman Lieutenant Colonel VK Batra confirmed the army had gone into the house to conduct searches, but denied any rape was committed.
There have been three rape cases
Indian authorities deny the allegations, saying they will investigate all reports and punish the guilty.
Civil authorities have also launched an investigation and have sent the two victims for a medical check-up, a government official said.
The rape allegations, the third in less than 10 days involving the army, come at a time when India‘s Home Minister Shivraj Patil is on a three-day tour of the insurgency-hit region.
Police said they registered a case against seven Indian army personnel on Saturday for another alleged rape in southern Kashmir, while on 29 October, another two soldiers and a policeman were arrested on similar charges.