The protest came a day after Kashmir's government said it would set up 18 new colleges across the state. A college was not allocated for Magam.
Violence erupted after demonstrators blocked the main highway connecting Srinagar with the rest of the country, said Bukhari.
Shops and businesses in the township closed in protest and hundreds of students demonstrated on the streets shouting anti-government slogans.
India's only Muslim-majority state is in the grip of an 18-year-old revolt against New Delhi's rule that has left more than 68,000 people dead.