The Taxation of AI Agents: Can India Tax Autonomous AI-Commerce Without Recognising the AI as a Taxable Person?

Abstract

The rapid development of autonomous artificial intelligence agents is transforming commercial activity. Unlike conventional software, such agents can negotiate prices, select counterparties, execute purchases, provide services and complete transactions without contemporaneous human intervention. That development creates significant difficulty for India's tax framework, which assumes that taxable income, taxable supplies, withholding obligations and permanent establishments are connected to an identifiable legal person. This article examines whether India can tax autonomous AI-commerce without recognising the agent itself as a taxable person. It analyses the application of agency principles under the Indian Contract Act, 1872, business connection and significant economic presence under the income tax legislation, the rules governing a dependent-agent permanent establishment, transfer pricing founded on the analysis of development, enhancement, maintenance, protection and exploitation of intangibles, and reverse-charge obligations under the goods and services tax together with withholding at source. It argues that existing doctrines can in most cases attribute tax consequences to the human or corporate operator that develops, deploys, trains, controls or economically benefits from the agent, and it proposes a rule of operator attribution, operationalised thresholds for significant economic presence, enhanced transfer-pricing disclosure and a ratification-based framework for agent-to-agent commerce. Fully autonomous, diffusely owned, self-funding or collectively governed agents nonetheless expose a genuine gap in attribution. The article concludes that India should defer the question of personhood for artificial intelligence and pursue targeted statutory clarification and international coordination.