We present and numerically demonstrate a novel polarization-insensitive (PI) 40-channel 100-GHz spacing fold-back planar echelle grating (PEG) multiplexer/demultiplexer (Mux/Demux) to realize the compact 1 × 2 crossing-less photonic integrated wavelength-selective switch (PIC-WSS). The PI operation is achieved by a polarization splitter to feed the TE and TM mode into the PEG via two waveguides with different incidental angles so that the two diffracted modes combine at the same output waveguide. By optimizing the design of different input/output angle combinations and sharing the same blazed angle, a single compact PI PEG with fold-back configuration can simultaneously work as twice the Demux and Mux required. The footprint of the single fold-back PI PEG is only ∼40 mm2. The numerical results show that the 40-channel 100-GHz spaced PI fold-back PEG has < 2.4 dB insertion loss, < –60 dB cross talk, zero polarization-dependent wavelength shift (PDWS), 0.3 dB polarization-dependent loss (PDL), < 0.5 dB loss variation and < 0.01 nm wavelength shift between Mux and Demux.