India is all time good for visit, besides you choose right places, if you have decided to cover the region between the Delhi To Mumbai then then best time would be Nov. to Feb, March.
Kerala and Goa are the best while in these days also and it is very pleasant there. In winter season hill stations would be cool due to their altitude but you will enjoy fog on the street of Delhi. You should avoid the period of June to Sept for rainy season, there would be more humidity and also unpleasant environment.

I have replied on your post in the europe forum.

nov to jan is ideal..

unlike most other places india is tough at back pack levels, but doable... be very careful of sanitation and what and where you eat...

November to February is best. Roughing it and going on a low budget may not be what you really want to do in India. Be careful when choosing overnight accommodations that they are located in safe areas. Avoid road travel after dark. Don't walk out at night (it's too dark to see what you're walking on). Don't assume a western standard of safety. Stairwells may not have hand rails and may not be lit at night.

Flying within India can save a lot of time depending on where you're trying to get to. Some train routes can take 24-36 hours!

Two months is plenty. Many of us get two weeks. Don't overbook your schedule. India isn't an easy country to do things fast.

I should add, avoid mid to late December. Getting train and hotel bookings will be difficult and much more expensive. It's a busy travel season for Indians.

India has a very extensive train system, no need to fly. Take a look at http://seat61.com/India.htm#

Also, no need to stay in high end hotels, take a look at Lonely Planet and Rought Guide, perhaps Footprints, for budget accommodations.

Two months is enough time to visit both the north and south. You might find my trips useful -
ten weeks in 2001: http://wilhelmswords.com/asia2001/index.html
six weeks in 2010: http://mytimetotravel.wordpress.com/2010/12/20/into-india/

Post on Indiamike. You are MUCH more likely to find backpacker ideas there. Many of the folks on this forum spend $300/night or more on hotels in India. Nothing wrong with that, and you will get general tips here.
But you are less likely to get a large number of helpful practical actual experiences responses here for your budget.

I am going to go against the consensus here and suggest that you go mid September - mid October, during the shoulder season. You will find incredible bargains (we got 40%+ discounts at all of our hotels) and fewer tourists. We did not encounter monsoon conditions anywhere in the north - just scattered showers, with highs in the 80s and not too humid.

Also, although "everyone" goes in the winter months, that is not ideal either - very crowded with tourists and often foggy (causing flight delays and cancellations) or very cold.

If you opt to go in late summer just after the monsoons, there will be more mosquitoes. August - late October are when mosquitoes are at their height. Depending on what type of accommodations you choose, a mosquito net over your bed may be a good idea.

India is not Europe. Backpacking in countryside is very rustic. Water is carried from wells, plumbing is usually non-existent. We did not see Western trekers in the countryside we visited. Country people in India live very different lives from the USA and Europe. Safety I do not know about but I think it would be hard to maintain your health.

You can trek in the mountains - there's a vast range of options for all preferences/ levels. You can head to the Northeast Himalayas or the Northern - both are spectacular and very rewarding.There are well researched books and blogs to help you on your way.

You can trek in hill country, too. See, e.g. http://www.indiahikes.in/weekend-treks/
(I don't know anything about the company, they showed up when I did a simple search.)

Once again thanks for the input I at least now have a slight clue of what I want to do. Decided on 1 month North 1month in South. Arriving September or October. Depending on how fast we save money, we (acutually me) are trying for option of spending extra 2 weeks if really want to. I've started cleaning apartment buildings stairs in morning before work. All money will go towards Indian trip. Will go to North first. So far decided on Rishikesh (I love yoga and meditation, my partner not) then trekking Kuari Pass. Want to include Agra (Taj Mahal) and Ajanta and Ellora canves. Still working on route. Really wanted to go to Osho's ashram as love his style meditation but heard its very very materialistic & they don't even do anything to help the poor in Pune. Kind of defeats whole point. In South definately backwaters of Kerala. Going to give Goa a miss. That,s as far as I've got.

Good choices Rutb393.Research hard to find the more hidden non-commercialised gems. Best way to go in india. since you seem interested in spirituality - consider visiting one of the holy dargahs during an urs for some of the most amazing sufi music possible, eg ajmer or nizammudin delhi.
Agree on osho.

As someone suggested, once you have rough plan for your travel put it on indiamike. You would get indepth responses there. If you want to go to Rishikesh (4-5 hours from delhi), land in Delhi and go to Rishikesh, Haridwar and then onwards for your trek. Agra is 4 hours from Delhi and very approachable. Ajanta/ellora are overnight journey from Mumbai. If you book flights now, it would be pretty cheap (around Rs 3000/person or $60) so north to south trip you can do on flight as well. Or visit indianrail.gov.in for train timings.