Are you looking for a fixed-income investment that provides returns higher than Fixed Deposits, offers guaranteed returns with zero risk, and has short tenure?
Look no further and explore this attractive money market instrument called Treasury Bills issued by the Government of India.
- What are Treasury Bills?
- How much is the minimum investment?
- How to invest in Treasury Bills?
Read this blog to find answers to all your questions on Treasury Bills.
Who issues Treasury Bills?
The government of a country issues Treasury Bills
What are Treasury Bills (T-Bills)?
Let’s understand this in the simplest way possible!
The government undertakes many projects for building the nation.
When the government has to fund projects to construct highways, repay debts, build defense systems, or execute social programs, it borrows money from investors by issuing Treasury bills. Essentially, Treasury bills are short-term loans to the government, with maturities ranging from a few days to a few months but usually less than a year. In exchange for the money borrowed, the government pays a small fee to the investors which can be called the return. Overall, Treasury bills are a way for the government to obtain short-term financing while providing investors with a safe and reliable investment option.
Why does the government issue Treasury Bills?
That’s a great question!
While government collects taxes from the public to undertake developmental projects, all the taxes collected by the government as revenue may not be adequate to cover all the government’s expenses.
Additionally, the government is responsible to execute the operations without depleting the cash reserves below a defined threshold limit. For this reason, the government depends on issuing Treasury Bills to raise short-term capital without disturbing cash adequacy.
Another reason why the government may issue Treasury Bills is to monitor the interest rates in the economy. By competing with other borrowers in the market, the government can help in checking the interest rates and avoid volatility in the financial markets.
Are Treasury Bills Safe Investments?
Yes. Treasury Bills are safe investments because they are backed by the credit and security of the government. Even during an economic downturn, the Central government is bound to repay the investor fully. Moreover, the fixed and short tenure of Treasury Bills makes them a predictable form of investment to get returns in a short time frame.
T-Bills are nothing but G-Secs with a maturity of less than a year.
What are the types of Treasury Bills?
Treasury Bills are differentiated based on their tenure of maturity. The tenure of T-Bills is less than one year.
The 3 types of T-Bills are –
91 days T-Bills
182 days T-Bills
364 days T-Bills
What is the minimum investment required to buy Treasury Bills?
The RBI has notified that the minimum investment for T-Bills is Rs 10,000. If someone is interested to invest more, T-Bills can be bought in multiples of Rs 10,000.
How much is the interest rate on Treasury Bills in India?
Treasury bills are zero-coupon debt instruments. But an investor earns gains on the Treasury Bills by buying them at a discounted rate and receiving face value upon maturity.
How to buy or invest in Treasury Bills in India?
As marketable securities, Treasury Bills are bought and sold in the secondary market. One can also buy Treasury Bills from one of the brokerage houses of their choice. Jiraaf as a platform also sells Treasury Bills to its customers.
Once T-Bills are purchased, the units are credited to your demat account, and all related repayments will be directly credited to your bank account tied to your demat account on the maturity date.
What is the tax treatment on Treasury Bills in India?
When it comes to treasury bills, the income generated attracts short-term capital gains tax, with the tax rate subject to the investor’s income tax slab. A key benefit of government securities (Treasury Bills in this case) is that they are not subject to tax deducted at source (TDS). This means that TDS is not deducted from the interest payments made to investors.
What are the benefits of investing in Treasury Bills?
Low/No risk: The issuer of Treasury-Bills is RBI. The risk associated with Treasury Bills investment is almost negligible with the complete security of the government.
Liquidity: The maturity period of the Treasury Bill is less than 364 days. The short tenure of the Treasury Bills makes them a predictable and highly liquid investment option.
Better Returns than Bank Fixed Deposits:
As of March 2023, T-bills maturing in six months have an annualized yield of 7.23%, compared to a 6-month FD interest rate closer to 5.75%.
Reserve Bank of India (RBI published rates)
Tradable in Secondary Market:
Treasury Bills can be sold by the investor in the secondary market and converted into cash before their maturity.
How can you buy Treasury Bills on the Jiraaf Platform?
Investing in Treasury Bills on Jiraaf is a simple process.
- Sign up on the Jiraaf platform.
- Complete your KYC
- Check the ‘Opportunities’ section for live Treasury Bills deals.
- Invest and submit.
