Legspinner Yuzvendra Chahal finished with a staggering six wickets for 25 runs as England, chasing 203 to win, collapsed from 119-2 to 127 all out.
On a brilliant batting surface, Suresh Raina (63 off 45 balls) and MS Dhoni (56 off 36) earlier struck blistering fifties for India, the latter's first in his 76 T20Is.
England were well placed after 12 overs of their reply, but then Eoin Morgan (40 off 21) and Joe Root (42 off 37) fell to consecutive Chahal deliveries to trigger the dramatic collapse - eight wickets falling for eight runs in 19 deliveries.