Just got an email as part of the Amazon Associate program that MP3 songs sold on Amazon are DRM free - that means you can play them on your iPod or any computer without restrictions. Every song on Amazon MP3 is encoded at 256 kilobits per second.
They have some 40,000 songs and albums related to India and most of these songs are priced from 89 cents to 99 cents.
If you are looking for hindi bollywood music, classic songs or religious albums (like bhajans), Amazon has a dedicated section for Indian songs on the store - Goto MP3 Downloads -> MP3 Albums -> International -> India & Pakistan.
Before downloading the full MP3 track from Amazon, you can listen to short preview of the music in the browser itself.
Through December 31, 2007 Associates are eligible to earn 20% on all MP3 referrals (up to $1.50 per item). Beginning January 1, 2008 the referral fees will be 10%. There is no limit to the number of items on which referral fees are earned.