Which one of the following statements correctly describes the meaning of legal tender money?

Legal tender is money that the law obliges a creditor to accept in settlement of a debt, so he cannot refuse it merely because he prefers another form of payment. That is exactly option B. In India, rupee notes are legal tender under Section 26 of the RBI Act, 1934, and coins are covered under the Coinage Act, 1906, which has been amended over time, so verify current provisions before quoting sections.

Why the others fail:

• A confuses the term with court fees. Court fees are governed by procedural and fee rules, and legal tender has nothing to do with defraying litigation costs.
• C describes bank money or credit instruments. Cheques, drafts and bills are not legal tender because a creditor can refuse them, and their settlement depends on the paying bank honouring them.
• D describes metallic coins in circulation. Coins may or may not be legal tender in a given form and amount, and the concept is defined by the legal obligation to accept, not by the material of the money.

The core concept is the distinction between money as a medium of exchange and money as a legal discharge of debt. This connects to Mains questions on monetary policy, the role of the RBI and the spread of digital payments, where you must explain why a UPI transfer is not the same as legal tender in the strict sense.

Trap: Aspirants pick A or C because the words sound financial or procedural. Legal tender is defined by the creditor's compulsion to accept, not by where or how the money is used.