For those looking for a safe investment option with better returns than Fixed Deposits (FDs), Treasury Bills (T-Bills) are an excellent alternative. These government-issued securities are short-term investment tools that provide fixed returns with minimal risk, making them ideal for conservative investors.
Issued by the Reserve Bank of India (RBI), T-Bills cater to individual and institutional investors alike, offering a secure way to invest while supporting government borrowing.
Key Features of Treasury Bills
- Low Risk: T-Bills are backed by the Government of India, ensuring there is no risk of losing money.
- Higher Returns: The returns on T-Bills are generally higher than those offered by traditional FDs.
- Short-Term Investment: These securities mature within a year, making them ideal for short-term financial goals.
- Fixed Returns: Investors know the exact returns at the time of purchase, ensuring transparency.
Types of Treasury Bills
The RBI issues T-Bills in three durations, each with its unique maturity period:
- 91-Day T-Bill: Matures in three months, suitable for ultra-short-term needs.
- 182-Day T-Bill: Offers a slightly longer investment horizon of six months.
- 364-Day T-Bill: Best for those seeking returns within one year.
How Treasury Bills Work
T-Bills are issued at a discounted price from their face value. Investors purchase them at a lower price, and on maturity, they receive the full face value. The difference between the two amounts represents the investor’s profit.
For example:
- If the face value of a 91-day T-Bill is ₹100, and you buy it at ₹97, you’ll earn a profit of ₹3 upon maturity.
How to Invest in Treasury Bills
1. Eligibility
Previously, T-Bills were limited to banks and financial institutions. Today, retail investors can also participate through platforms like:
- RBI Retail Direct Scheme
- Stock Exchanges (BSE/NSE)
2. Requirements
- A Demat Account is necessary to hold T-Bills.
- A minimum investment of ₹25,000 is required.
3. Process
- Step 1: Register with a broker or directly on the RBI platform.
- Step 2: Participate in RBI’s weekly auctions.
- Step 3: Upon purchase, the T-Bills will be credited to your Demat account.
4. Maturity and Returns
When the T-Bill matures, the government automatically credits the face value to your bank account linked to your Demat account.
Benefits of Investing in Treasury Bills
- Safe Haven for Money: Since T-Bills are government-backed, there’s no risk of default.
- Short Investment Tenure: Ideal for investors who don’t want to lock their money for long.
- Liquidity: T-Bills can be easily traded on stock exchanges, ensuring quick access to cash.
- Better Than FDs: T-Bills often offer higher returns compared to fixed deposits, making them a smarter choice for short-term goals.
- Transparency: Returns are fixed and known in advance, reducing investment uncertainty.
Tax Implications of Treasury Bills
The returns earned from T-Bills are considered short-term capital gains, which means:
- Taxable Income: Gains are added to your total income and taxed as per your income tax slab.
- No TDS: Unlike FDs, TDS is not deducted, but you’ll need to declare the earnings in your Income Tax Return (ITR).
Why Consider Treasury Bills Over FDs?
| Feature | Treasury Bills | Fixed Deposits (FDs) |
| Risk Level | Low | Low |
| Issuer | Government of India | Banks |
| Returns | Higher than FDs | Fixed, but generally lower |
| Liquidity | Tradable on stock exchanges | Premature withdrawal penalty |
| Tenure | Up to 1 year | Flexible (7 days to 10 years) |
| Taxation | Short-term capital gains | Taxed as per slab; TDS applies |
Why Are T-Bills Gaining Popularity?
- Retail Access: The RBI has made T-Bills more accessible to individual investors, encouraging diversification beyond FDs.
- Market-Linked Returns: Unlike FDs, where rates are fixed by banks, T-Bills benefit from competitive bidding in auctions, often resulting in higher yields.
- Economic Stability: By investing in T-Bills, investors indirectly support government initiatives and infrastructure projects.
Who Should Invest in Treasury Bills?
T-Bills are ideal for:
- Risk-Averse Investors: Those seeking guaranteed returns with minimal risk.
- Short-Term Planners: Individuals with financial goals within 1 year.
- Tax-Savvy Individuals: While taxed as per slabs, T-Bills still offer competitive returns.
