Cross-Border Insolvency and Taxation: Reassessing the Interface between India’s Insolvency and Income-tax Frameworks

With the increase in cross-border insolvency matters, issues concerning the interaction between tax and insolvency law are gaining greater relevance. These issues become particularly important where the assets, liabilities, or creditors of a corporation that are located outside India. The Insolvency and Bankruptcy Code, 2016 lacks a framework for addressing cross-border tax claims. In addition, tax treaties can lead to tensions between insolvency and taxation systems by assigning taxing rights among countries. The paper aims to identify the interplay between insolvency and tax law in India, with particular focus on the Income-tax Act, 2025, which came into force on 1 April 2026. To achieve this objective, the paper employees a doctrinal and comparative methodology, examining relevant legislation, judicial decisions, tax treaties, and approaches adopted by selected foreign jurisdictions in relation to cross-border insolvency and taxation. The paper expects to demonstrate that the lack of coordination between insolvency law, domestic tax law, and international tax law creates uncertainty in the treatment of cross-border tax claims and the allocation of taxing rights between States. The paper seeks to identify the legal gaps from the interaction between insolvency and tax law and propose principles for addressing them. the goal is to come up with a more reasoned approach that balances the heavy interests of States against the need to resolve cross-border insolvency cases effectively and justly Keywords: Cross-Border Insolvency; Taxation; Insolvency and Bankruptcy Code; Income-tax Act, 2025; International Tax Claims; Tax Treaties