When it comes to safe and short-term investments, Treasury Bills (T-Bills) are often at the top of the list. Issued by the government, T-Bills are a popular choice among conservative investors who prioritize capital safety over high returns. In this article, we’ll break down what T-Bills are, how they work, their benefits, risks, and whether you should consider them for your portfolio in 2025.
What Are Treasury Bills (T-Bills)?
Treasury Bills are short-term debt instruments issued by the government to meet its short-term funding requirements. They are considered risk-free investments because they are backed by the government.
- Issuer: Government of India (or respective central government in other countries)
- Tenure: Less than 1 year (91 days, 182 days, or 364 days)
- Nature: Zero-coupon securities (issued at a discount, redeemed at face value)
How Do T-Bills Work?
T-Bills are not issued at face value but at a discounted price, and investors receive the full face value at maturity. The difference between the purchase price and the face value is the interest earned.
Example:
- Face Value = ₹100
- Purchase Price = ₹97
- Maturity Value = ₹100
- Your earnings = ₹3
This means you don’t receive periodic interest payments; instead, your gain comes at maturity.
Types of Treasury Bills in India
- 91-Day T-Bill: Shortest tenure, suitable for parking surplus cash for 3 months.
- 182-Day T-Bill: Medium-term option for 6-month investment.
- 364-Day T-Bill: Longest T-Bill option, nearly 1 year.
Benefits of Investing in T-Bills
1. Safety and Security
Backed by the government, T-Bills are virtually risk-free.
2. Short-Term Investment
Perfect for those who don’t want to lock money for years.
3. Liquidity
They can be easily sold in the secondary market before maturity.
4. No TDS
T-Bill earnings are not subject to Tax Deducted at Source, although they are taxable under “Income from Other Sources.”
Risks and Limitations
1. Lower Returns
Compared to equities or mutual funds, T-Bills offer modest returns.
2. Not for Long-Term Wealth Creation
Best for parking short-term funds, not for aggressive growth.
3. Interest Rate Fluctuations
If you sell before maturity, prices may vary based on prevailing interest rates.
How to Invest in T-Bills?
You can invest in T-Bills through:
- RBI Retail Direct Platform (Direct from RBI)
- Stock Exchanges (via your demat account)
- Banks and Primary Dealers
Minimum Investment: ₹10,000 (in multiples of ₹10,000)
Who Should Invest in T-Bills?
- Conservative investors looking for safe and short-term instruments.
- People with idle cash for 3–12 months.
- Diversifiers who want risk-free allocation in their portfolio.
Bottom Line
Treasury Bills are among the safest and most liquid short-term investments. While they may not make you rich overnight, they serve as a reliable option for capital protection and short-term parking of funds.
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