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Unlocking the Secrets : What are Treasury Bills in India?

What are Treasury Bills in India

When the central government borrows funds from investors for a shorter period i.e. less than a year, then Treasury bills are issued to the investors which works as a promissory note for the investors. Here you will get the best knowledge related to treasury bills and everything is simply explained here with the help of examples, stay till the end. 

What are Treasury Bills in India?

What are Treasury bills in India, Treasury bills are the financial instrument issued by the RBI ( Reserve Bank Of India) on behalf of the Central Government to meet short-term financial needs of the central government, for less than 1 year, the central government borrows money from the public against issuing treasury bills, the treasury bills work as a promissory note which ensures investor that their money is safe and will be returned on the maturity date with increment.

Central government uses the money which is collected from the T-bills for the construction of roads/ schools/ hospitals/ bridges, expenditure on military, etc.

Treasury bills are highly secured and gives a better return as compared to Fixed Deposits (FD), Treasury bills don’t provide any interest on the amount invested as does FDs, rather treasury bills are issued to the investor at discounted value and redeemable at nominal value / face value at the time of maturity, so the difference between the discounted value and the nominal value is the return on investment (profit) for the investors

Example: Let’s say there are 182 days maturity T-bills available whose face value / nominal value is 100 rupees and discounted price is 94 rupees, so you have to pay 94 rupees at the time of issuing and after completion of 182 days (maturity), it will automatically be sold and you will receive 100 rupees per unit directly into your bank account.

Types of Treasury bills

T-bills are categorized into 3 types based on their maturity periods:

  • 91 days treasury bills
  • 182 days treasury bills
  • 364 days treasury bills

How to invest in treasury bills?

The best and easy way to invest/ buy treasury bills in India is through a trusted broker who has permission to participate in T-bills auction, the most trusted brokerage firm to buy T-bills in India is Zerodha

To buy T-bills through Zerodha, follow the steps:

  • First of all, Create your D-mat account on Kite (by Zerodha) by completing 7 steps of verification.
  • Verification may take upto maximum of 48 hours, once your details are verified, you will receive an Email containing your login credentials.
  • Then, log-in to the platform of Coin by Zerodha, same login credentials work on all the platforms of Zerodha.
  • Click on the column of Government bonds, you will find there option for buying in T-bills.


what are Treasury bills in India
  • Now you have to place the order and your proportionate amount will be blocked from your trading account, if you get the allotment then T-bills will get transferred to your D-mat account within 5 working days otherwise your whole money will be refunded, T-bills are issued every week and bids can be placed on Monday and Tuesday.


(Note: Coin by Zerodha charges 0.06% fees as brokerage charges + 18% GST on the total brokerage amount)

Mechanism of T-bills

  • Firstly, you have to place a bid but remember that initially, you have to pay the whole amount, based on nominal value not discounted value.

 Example: If,  Face value: 100 rupees

     Discounted price: 97 rupees

We all know that the minimum investment amount is 10,000 and 1 lot of T-bills contains 100 units

So, to procure 1 lot of T-bills you have to pay the whole 10,000 rupees, not 9700.

  • If you get the allotment then your money will be deducted otherwise whole money will be refunded after bidding is closed, in case you are allotted the T-bills then according to the above example (face value 100; discounted price 97) you will be refunded 300 rupees (10,000-9700), into your registered bank account within 2 working days from the date of auction.
  • At the time of the maturity of your T-bills, you will get 10,000 rupees automatically into your bank account which is linked with your D-mat account

How to calculate the yield on T-bills?

To calculate the yield (return in percentage) on T-bills you have to simply apply the following formula:

Discounted amount / Purchasing price * 365 / tenure of T-bills * 100

Let’s understand it with the help of an example

You purchased a T-bill whose nominal value is 100 rupees and discounted price or purchasing price is 95, tenure is 182 days, calculate the yield on T-bills.

Formula: Discounted amount/ Purchasing price* 365/ tenure of T-bills * 100

Here, Discounted amount = 5 (100-95) 

           Purchasing price = 95

           Tenure of T-bills = 182 days   

          = 5/ 95 * 365/ 182 * 100

                       = 10.52% (P.a)

Note: Yield on T-bills is calculated on a yearly basis (P.a)

Taxation on the gain from T-bills

Investment in treasury bills is a short-term investment as the maximum tenure of investment in T-bills is 364 days which is less than a year (365 days), so the income from T-bills is taxed under the short-term capital gain (STCG) category, and the tax rate for STCG depends on the investor’s income tax slab

Lemme explain, if your taxable income is 10,00,000 rupees without considering income from T-bills, but you have earned rupees 50,000 from T-bills that year, then your total taxable income will become 10,50,000 rupees, now you have to pay tax on 10,50,000, and according to income tax slabs anyone whose income is between 10,00,001 – 12,50,000 rupees has to pay 20% tax. To knowing more about income tax slabs, click

Note: There is no TDS deducted on buying and selling of government securities (T-bills)

Benefits of T-bills

  •  T-bills are very secure financial instruments as they can only be issued by RBI, and there is no possibility of default.
  •  The yield of T-bills is comparatively higher than FDs (Fixed Deposits).
  •  It can be converted into cash anytime before maturity.
  • T-bills are the best short-term investment source for investors.
  • It is a very simple process to invest in T-bills.
  • No TDS (Tax Deducted at Source) will be deducted on redemption, for retail investors

Limitations of T-bills

  •  The return generated from T-bills cannot beat returns generated by investing in gold, silver, property, etc
  • You cannot invest less than 10,000 rupees in T-bills
  • Fluctuating interest rates – T Bills’ interest rates are subject to change based on various factors, including economic conditions and monetary policy decisions. If you hold T Bills with fixed interest rates, you may find yourself stuck with lower yields if interest rates rise in the market.

FAQs section - What are Treasury Bills in India

Q1. What is the minimum investment in T-bills?

A1: You have to minimum invest 10,000 rupees in Treasury bills, and in multiples of 10,000 thereafter.

Q2. Are T-bills a safe investment?

A2: Absolutely yes, investing in T-bills is a very safe investment option and there is no chance of default as T-bills can only be issued by RBI on behalf of the Central Government, in India.

Q3. In which form do T-bills are issued?

A3: T-bills are issued in an electronic form now, but earlier it was issued on paper.

Q4. How much percent interest is paid on T-bills?

A4: There is no interest paid on T-bills; rather they are issued on discount and redeemed at face value/ par value on maturity, the difference between discount price and par value works as a profit to the investor.

Q5. Who can invest in T-bills in India?

A5: Individuals, organizations, and corporate investors may buy Treasury bills through a bank, broker, or registered dealer.

Q6. How to redeem T-bills?

A6: It will be automatically redeemed at the time of maturity and funds will be directly transferred to your bank account, linked with the D-mat account.

Q7. When can I bid for T-bills?

A7: T-bills are open to bid on Monday and Tuesday every week.

Q8. Can I sell my treasury bills before maturity?

A8: Yes, you can sell your treasury bills before maturity. 


In this article – Unlocking the Secrets : what are treasury bills in India, we have explained everything that an investor need to know about treasury bills with the help of examples. We hope you understand and like the way of explanation as we explained everything related to the T-bills in very simple language. 

So, why waiting start investing.

Read our latest blog on What is NAV in Mutual Funds, CLICK HERE

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