Taxing Digital Intellectual Property: Legal Examination of Virtual and Real World Problems

Abstract

Intellectual Property has been a classic and time-tested pillar of economic growth, an innovation engine, and a generator for creativity, and technological advancement. However, the 21st century marks the dawn of the Fourth Industrial Revolution, one where the physical, digital, and biological worlds come together.
This technological revolution, fuelled by breakthroughs in AI, blockchain, and decentralized economies, has spawned revolutionary shifts in the production, monetization, and taxation of intellectual property.
In 2025 and beyond, traditional IPR thinking will be disrupted by the advent of a new generation of intangible assets in the form of inventions created by AI and holographic trademarks, virtual property, and non-fungible tokens. Not only do they disrupt the ownership legal regimes, but also exert pressure on the old tax systems built during the industrial age. While these intangible assets become the centre of the global economy, the existing tax systems lack the capability to manage the complexities of the digital era.
We examine in this paper the challenges posed in the taxing intellectual property regime in India and the possible solutions. As the internet and metaverse grow, there is an urgent need to reexamine Indian taxation laws in taxing intangible
property like taxation in IPR.