This study assesses the artificial intelligence (AI) literacy and perceptions among Master of Library Science (MLS) students in India. It aims to identify the most relevant AI knowledge areas for library science, examine students' attitudes toward AI's potential impact on library services, and explores the importance of AI literacy for professional practice. A quantitative survey administered to 118 final-year MLS students via WhatsApp groups and personal networks collected data on AI literacy levels, perceptions, and attitudes. The findings reveal that natural language processing (NLP) is considered the most transformative AI technology, with significant interest in other areas like recommender systems and data mining. Students express optimism about AI's potential to enhance library services but raise concerns about ethical implications and job displacement. The study highlights the need for increased AI literacy training and integration into LIS programs, emphasizing its importance for future career competitiveness. The results provide valuable insights into how AI literacy can be fostered among MLS students to align with evolving library services and user needs.