The Interaction between India's current insolvency code and income tax law

Guest | Last updated: 10 August 2020

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India's Insolvency and Bankruptcy Code (IBC) of 2016 significantly reshaped insolvency laws, prioritising secured creditors and placing government taxes lower in the pecking order for debt recovery. However, the IBC mandates that tax authorities must adhere to approved resolution plans, even concerning tax dues. The article delves into the income tax implications of IBC resolution plans, including how waived liabilities and debt write-backs are taxed, and the potential for mitigating Minimum Alternate Tax (MAT). It also discusses provisions for carrying forward losses and depreciation, even with changes in shareholding, and the tax considerations for share transfers below fair value.

After adopting the Insolvency and Bankruptcy Code, 2016 (IBC), India overhauled the insolvency and bankruptcy law. The IBC is a landmark statute and a transformation through Indias insolvency regime. The IBC insolvency settlement provides for the submission of potential creditor payments for the recovery of an unpaid debtor. These mitigation strategies include the restructuring of the distressed business debtor. With respect to the allocation of proceeds resulting from the business debtor

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