Question

According to Income Tax Act "zero coupon bond" means a bond:

• A. issued by any infrastructure capital company or infrastructure capital fund or public sector company or scheduled bank on or after the 1st day of June, 2005;
• B. in respect of which no payment and benefit is received or receivable before maturity or redemption from infrastructure capital company or infrastructure capital fund or public sector company or scheduled bank
• C. which the Central Government may, by notification in the Official Gazette, specify in this behalf.
• D. All of the above

Hint:

Zero coupon bonds do not pay periodic interest, but are issued at a discount and redeemed at face value at maturity.

Answer 1

The Correct Option is D

Step 1: Understanding Zero Coupon Bond.
Under the Income Tax Act, a "zero coupon bond" is a bond that does not pay interest but is issued at a discount, and the face value is paid at maturity or redemption. These bonds may be issued by certain infrastructure companies or public sector companies.
Step 2: Explanation of the options.
- (a) Issued by infrastructure companies or public sector companies: This is correct, as zero coupon bonds are issued by these entities after June 1, 2005.
- (b) In respect of which no payment or benefit is received before maturity or redemption: This is correct, as zero coupon bonds do not provide interim interest payments.
- (c) Which the Central Government may specify: This is also true, as the government can designate bonds as zero coupon bonds through notifications.
- (d) All of the above: This is the correct answer, as all statements are true for zero coupon bonds.
Step 3: Conclusion.
Thus, the correct answer is (d) All of the above.