The problem of a sub-surface circular elastic inclusion with single interfacial debond in plane elasticity is considered in the present work. The sub-surface defect is modeled as elastic circular inclusion lying at some distance from the free surface. The presence of such defects is critical to the life of components subjected to high contact stresses. The question of the presence of free boundary on the stress intensity factors (SIF) of interfacial arc crack under remote uniform stress fields is addressed in this study. By varying the elastic modulus of inclusion, three cases of elastic mismatch are considered: 1) inclusion is hard corresponding to sub-surface rigid inclusion, 2) inclusion is soft corresponding to sub-surface hole, 3) and, inclusion has same material properties as surrounding matrix (equivalent to sub-surface arc crack in elastic half-plane). Half plane is simulated by means of long crack in the vicinity of the circular elastic inclusion so that half-plane boundary conditions are represented locally. Singular integral equation is setup to simulate half-plane boundary. SIF at arc-crack tip closest to the half-plane is evaluated to study its variation as the inclusion approaches half-plane.