General Bikram Singh's robust remarks yesterday came amid mounting public anger at the alleged decapitation of one of the soldiers, and further ratcheted up tensions with Pakistan.
Analysts, however, have said a complete breakdown in ties is highly unlikely.
Islamabad blames India for the new crisis, claiming Indian forces had violated the ceasefire first.
The two nations have fought three wars, two over Kashmir, since Pakistan's independence in 1947. Both states are nuclear-armed.
Mr Singh said the Indian army would honour the Kashmir ceasefire as long as Pakistan did, but would respond immediately to any violation of the truce.
Last week saw the worst outbreak of violence in Kashmir since a ceasefire nine years ago.
Both armies have lost two soldiers in fighting along parts of the 460-mile (740km) ceasefire line since the crisis flared up on January 6, when Pakistan accused Indian soldiers of entering its territory and killing a soldier.