The Indian eves desperately needed a win in the match to stay in the hunt for a place in the AFC Cup but their dreams were dealt a blow despite playing some admirable football thoroughly enjoyed by locals.
Yu Hsiu Chin (43rd minute) and Lai Li Chin (81st minute) scored for Taipei while Sasmita Malik gave India their only goal in the 53rd minute.
If the twice SAFF Champions won the tactical battle in the first half, they were by far the better side in the second period.
Head Coach Anadi Barua's ploy of playing deep and attacking on the counter paid off as Chinese Taipei, which scored six goals against Palestine in their opening game, were bottled up by India's defence for most part of the first essay.
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The second half belonged to India and especially Sasmita Malik whose world-class free kick in the 53rd minute left the motley crowd on a pleasant evening in Palestine awestruck.
Sweeper back Ashalata Devi's alacrity came to the fore time and again. Her crucial block in the 8th minute kept Hsiu Chin's powerful right-footer at bay.