Treasury Bills do not pay periodic interest. Instead, they are zero-coupon securities. For example, the government might issue a 91-day T-Bill with a ... In this detailed guide, we will break down the core parameters, options, and advantages for retail investors in India.
- Government-Backed Safety: T-Bills are short-term debt instruments issued by the Government of India, making them practically default-free.
- Discount to Face Value: T-Bills do not pay interest. Instead, they are issued at a discount and redeemed at face value upon maturity.
- Three Tenure Options: T-Bills are issued with maturities of 91 days, 182 days, and 364 days, offering flexibility for short-term parking.
How Do Treasury Bills Work?
Treasury Bills do not pay periodic interest. Instead, they are zero-coupon securities. For example, the government might issue a 91-day T-Bill with a face value of Rs. 100 at a discounted price of Rs. 98.5. You buy it for Rs. 98.5 today. After 91 days, the government pays you Rs. 100. The difference of Rs. 1.5 is your return (yield), which functions exactly like interest.
Why Retail Investors Should Consider T-Bills
T-Bills are highly safe because they are backed by the sovereign guarantee of the Government of India. Unlike corporate deposits or even bank deposits (which are only insured up to Rs. 5 Lakhs), there is zero risk of default. Furthermore, their returns are often higher than savings account interest and competitive with short-term bank fixed deposits, making them a premium parking spot for cash.
How to Buy T-Bills: RBI Retail Direct Portal
The Reserve Bank of India (RBI) launched the 'RBI Retail Direct' scheme to allow retail investors to buy government securities directly. You can open a free 'Gilt Account' on the RBI Retail Direct portal using your PAN and bank details. Once active, you can participate in the primary auctions of T-Bills using UPI or NetBanking, with a minimum investment amount of just Rs. 10,000.
| T-Bill Tenure | Pricing Structure | Tax Treatment |
|---|---|---|
| 91 Days | Issued at discount, redeemed at par | Returns taxed as short-term capital gains at slab rates |
| 182 Days | Issued at discount, redeemed at par | Returns taxed as short-term capital gains at slab rates |
| 364 Days | Issued at discount, redeemed at par | Returns taxed as short-term capital gains at slab rates |