The picture - painted by Indian artist Raja Ravi Varma in 1880 - sold for £602,400 ($1.24m).
It was sold by the London auctioneer, Bonhams, on Friday for a price which dwarfed the estimated sale price of £50,000-70,000.
It fetched three times what the next most expensive Varma painting went for.
The painting is of the Maharaja of Travancore and his younger brother welcoming Richard Temple-Grenville, governor-general of Madras, on an official visit to what is now the southern state of Kerala in 1880.
The painting was bought by Neville Tuli, who correspondents say represents one of the top art dealers in Mumbai (Bombay).
Mr Tuli told the Press Association news agency that his acquisition was significant as "it is very important to bring back to India part of its artistic cultural heritage".
A Bonhams spokesman said the picture had generated so much interest because it depicted a meeting between an English aristocratic and an Indian aristocrat at the height of British rule over India.
Correspondents say that Mr Varma (1848-1906) was one of the most admired academic painters of colonial India, and was often invited to state occasions by British and Indian high officials.
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