The aim of the present study is to examine the internal market efficiency of the Indian index options by testing S and P CNX Nifty index options using box-spread arbitrage strategy. Daily closing prices of index options from April 01, 2008 to March 31, 2012 are used to identify the mispricing and arbitrage opportunities with the model-free box-spread approach. The result of the sensitivity analysis of violations with respect to time to maturity and moneyness demonstrates that the majority of violations in options contract are deceptive, as the liquidity is expected to be very low in such contracts. Further, the proportion of exploitable violations severely falls after considering the transaction costs, as most of the profits were wiped out and showing negative profits. Thus, although the Indian index options market shows traces of inefficiency, in totality it is suggested that the Indian index options market is efficient as majority of violations are un-exploitable after incorporating transaction costs.