The Taiwanese went into the match in Sydney on Tuesday night sitting third in their group, just behind Vietnam on goal difference.
But the victory over India, coupled with Vietnam's 4-0 loss to group winner Japan, means Taiwan moved into second with two wins from their three games, sealing passage to the knock-out stage.
India finished bottom of Group C, losing all three of their matches.
The Indians made a bright start but Taiwan broke the deadlock on 12 minutes following a calamitous error in defence from India.
Sanju Yadav's back pass to keeper Chanu Panthoi was well short and allowed Chen Jin-Wen to collect.
She advanced forward and teed up Su Yu-Hsuan for the easiest of tap-ins with an unguarded net as Panthoi was left stranded by the errant pass.
On 39 minutes, India equalised in stunning fashion courtesy of a bullet free kick from Manisha.
The attacker stepped up to the set piece from 25 metres out, and unleashed a powerful left-footed drive that rattled the underside of the bar before bouncing out. VAR was consulted and confirmed the ball had crossed the line.
Deep into first half injury time, Taiwan added a second following a penalty after a handball inside the area.
Hsu Yi-Yun struck the upright with the spot kick but the rebound bounced off the diving Panthoi and rolled into the net for the own-goal.
After dominating the second half, Taiwan added a third in the 76th minute.
Wu Kai-Ching picked up the ball on halfway and released Chen with a defence-splitting pass. The winger took a touch, rounded the keeper and rolled the ball into the net.
India's shot stopper Panthoi was clattered into by team-mate Ngangbam Devi during the passage of play, with both players stretchered off.
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