Treasury bills are a type of Government Securities issued by the Government of India and it guarantees the payment for a later date. The Government collects funds in this manner to meet their short term requirements. This helps reduce the fiscal deficit of the economy.
Government Securities or G-Secs are of 2 types:
- Treasury Bills or T-Bills which have a maturity of less than 1 year
- Government Bonds are the securities with a maturity of more than a year.
In this article, we are going to focus on the Treasury Bills.
Investment Process
The treasury bills are open for bidding by exchanges every week in a non-competitive bidding window. The bids are open on Monday and Tuesday every week. The security will be credited to the demat account based on successful allocation. The maturity proceeds will be credited directly to the bank account.
Individuals can obtain treasury bills at a discount from the face value and redeemed at face value, which is directly encashed to the bank account. The minimum investment is Rs.10,000 and then in multiples of it.
Duration
Treasury bills (T-Bills) come for a duration of:
- 14 days
- 91 days
- 182 days
- 364 days
Exiting Investment
These securities are traded on an exchange like stocks. So these can be bought/sold on the secondary market. But keep in mind, that this might be a little difficult to sell those securities in the secondary market due to the difficulty in finalising the selling price.
Safety
As these securities are backed by the Government, they are 100% secure form of investment.
Transaction Costs
Broker platforms like Zerodha and ICICIDirect charge 0.06% of the investment amount or Rs.6 for every multiples of Rs.10,000. There is also an additional 18% GST over it.
Taxation
The bills have an expiry within a year, hence are taxed as Short Term Capital Gain (STCG).
Treasury Bills are a great and safe way to invest idle money in the short term. It beats inflation and great for risk averse individuals. Read more finance related articles here.