Abu Salem is alleged to have been the ringleader behind a series of deadly bomb attacks in Mumbai in 1993, as well as several other high profile murders and gangland extortion cases.
Salem and his second wife Monica Bedi, a failed Bollywood actress, arrived from Lisbon on a chartered flight on Friday morning escorted by a team of 20 Indian law-enforcement officials.
Following initial questioning, Salem was taken under heavy security to a Mumbai anti-terrorist court where a judge ordered him held in police custody until 23 November, when he will appear before the court again.
His extradition follows three years of legal and diplomatic wrangling. He has 54 criminal cases pending against him, 25 of them in India's commercial capital alone.
Bedi faces trial in connection with two cases of passport forgery. She had allegedly travelled on forged documents to stay with Salem in Lisbon in the last few years.
Salem, arrested in Lisbon, Portugal, in September 2002, is a prime suspect in the 1993 bombings that struck Mumbai's stock exchange along with trains, hotels and petrol stations, killing 257 people and wounding more than 1100.
"Abu Salem was afraid of the Hindu mafia because he was aware that the Hindu mafia wanted to kill him"
Luiz Bello Morais,
Abu Salem's lawyer in Portugal
Police also suspect Salem in several high-profile killings, including attacks on Hindi film personalities, extortion and the 1997 murder of Bollywood music industry czar Gulshan Kumar.
Authorities also hope Salem will provide information about another alleged Indian mobster, Dawood Ibrahim.
Ibrahim now reportedly lives in Pakistan, though officials there deny this.
To get Portugal to extradite Salem, India had to promise to forgo the death penalty and impose a prison term of 25 years or less if he's convicted, according to CS Sharma, the lawyer representing Indian law-enforcement agencies at Friday's hearing.
"We want him in police custody for 30 days to facilitate interrogation for his role in supplying arms, ammunition and explosives to the conspirators and executioners of the blasts," Sharma told judge PD Kode of the anti-terrorist court.
Dozens of policemen, many armed with automatic weapons, surrounded the court building in the heart of Mumbai.
"Abu Salem will face charges of committing a terrorist act against the country, criminal conspiracy and supply of arms and ammunition," special public prosecutor Ujjwal Nikam said on Friday in Bombay.
"Now that he is in India and in custody, police can trace his network of associates all over the country," Nikam said.
A lawyer who represented Salem, a Muslim, in Portugal said the suspected bomber was worried that Hindu gangsters would kill him if he came back to India.
"The problem about Abu Salem was not about Indian authorities because the Indian government has given guarantees," Luiz Bello Morais told Times Now/Reuters Television from Lisbon.
"He was afraid of the Hindu mafia because he was aware that the Hindu mafia wanted to kill him."
There have been shootouts in past years between gangsters led by Muslim and Hindu criminal bosses.