Treasury Bills (T-Bills)

How Do T-Bills Work?

T-Bills are zero-coupon securities. This means they do not pay interest in the usual way. Instead, they are issued at a discount and redeemed at face value. The difference between the purchase price and the redemption value is your return. For instance, if you buy a 91-day T-Bill with a face value of ₹100 for ₹97, you earn ₹3 upon maturity. This ₹3 is your gain, and it is fixed at the time of purchase.

Key Features of T-Bills

• Maturity Periods: 91 days, 182 days, and 364 days

• Minimum Investment: ₹25,000, in multiples of ₹25,000

• Issued by: Reserve Bank of India (RBI) through weekly auctions

Interest Rates as of March 2025

• 91 Days: 6.9474% per annum

• 182 Days: 7.1199% per annum

• 364 Days: 7.1497% per annum

The yield depends on the purchase price. For example, if you buy a 91-day T-Bill at ₹97, your return is calculated as:

Yield = (100 − 97) / 97 × (365 / 91) × 100 = 12.40%

Benefits of Investing in T-Bills

• Low Risk: T-Bills are backed by the Government of India, so your capital is secure.

• High Liquidity: These securities are easily tradable in the secondary market.

• Tax-Friendly: No tax is deducted at source (TDS) on redemption. However, gains are taxable as per your slab.

Challenges to Consider

• Lower Returns: Compared to equity or corporate bonds, T-Bills offer modest returns.

• Inflation Risk: The real return can be low if inflation is high.

• No Long-Term Growth: T-Bills are for short-term parking of funds and not meant for wealth creation.

When Should You Consider T-Bills?

T-Bills are ideal if you are looking to park surplus funds for a short period without taking on much risk. They are also useful if you want to balance the risk in a diversified portfolio or need liquidity with capital safety.

Conclusion

T-Bills are a reliable short-term investment tool. While they may not offer high returns, they provide a combination of safety, liquidity, and predictable gains. For investors looking to manage cash or preserve capital in uncertain markets, T-Bills are worth considering.