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With reference to the Indian economy, what are the advantages of “Inflation-Indexed Bonds (IIBs)”

With reference to the Indian economy, what are the advantages of “Inflation-Indexed Bonds (IIBs)” ?
1. Government can reduce the coupon rates on its borrowing by way of IIBs.
2. IIBs provide protection to the investors from uncertainty regarding inflation.
3. The interest received as well as capital gains on IIBs are not taxable.

Which of the statements given above are correct ?

(a)

1 and 2 only

(b)

2 and 3 only

(c)

1 and 3 only

(d)

1, 2 and 3

Answer:

(a)

Application Based

Core Books/NCERT

Explanation

No tax exemptions given on such bonds. Statement#3 is wrong and therefore By elimination, answer is “’A”