Change the narration: He said, "I am busy now."

He said that he is busy now.

He said that he was busy then.

He said that he will be busy then.

None of these

The reporting verb "said" is in past tense, so the tense in the reported speech changes.

"Am" changes to "was", and "now" changes to "then".

So, "I am busy now" becomes "he was busy then" in indirect speech.