Advantage and Disadvantage of Treasury Bills in India

Advantage and Disadvantage of Treasury Bills in India

Treasury Bills

T-Bills are short term (up to 364 days) borrowing instruments of the central government,
which enable investors to park their short term surplus amount while reducing their market risk.
They are auctioned by the RBI i.e. Reserve Bank of India at regular intervals and issued at a discount to face value.
However, the state governments do not issue any T-bills.
Here are few of the most important Advantage and Disadvantage of Treasury Bills in India, You should know about

Also Read What are the Treasury Bills in India? – Maturity Period | Features | Issued by

Advantage and Disadvantage of Treasury Bills in India

  • No Risk Involved
    T-bills are issued by RBI and are supported by the GOI.
    It is a short-term debt instrument. Therefore the maturity period is less than a year (364 days) and is very well secured. Hence, no risk is involved.
    Investment in these bills assures the complete security of the amount. Even during the economic crisis, the government of India has to pay the complete amount to the investor.
  • No Tax Deducted at Source
    one key advantage of such T-Bills plan is that retail investors are not required to pay any TDS upon redemption of these bills, thereby reducing the hassles of claiming back the same via IT returns if he/she does not fall under the taxable income bracket.
  • Effortless Liquidity
    Individuals looking to generate short term gains via secure investments can choose to park their funds in T-Bills.
    These T-bills can be resold in the secondary market in India, thereby allowing people to convert their holding into cash during an economic crisis.
  • Better Returns Especially in the Short Term
    The interest gained by investing in a T-bill is definitely higher than the interest offered by bank FDs.
    The FD Interest Rates of most banks are about 4-5%, while the T-bill rate for 2019 is 6.50% for 91 days, 6.60% for 182 days and 6.70% for 364 days.
  • Transparency
    The bidding method of treasury bills allows investors to take part in the same by placing their bid.
    In other words, investors can get full transparency of the investment process. Also, it helps for wealth creation for individuals.
  • Simplified Settlement
    T-Bills can be sold in the secondary market, where investors buy or sell securities among each other, to meet money requirements.
    The settlement system for trading in T-bills is a system based on a method called Delivery versus Payment.


There are several advantages of T-bills. However, investing in T-bills also has some drawbacks.

Also Read How to Buy Treasury Bills in India? | NSE goBID | Eligibility | Bidding Period

  • Taxation
    Short term capital gain (STCG) realised on these bills is subject to STCG tax at rates applicable as per the income tax slab of an investor.
  • Returns
    Compared to other stock market investment tools, T-bills yield lower returns as they are government-backed debt securities.
    T-bills are zero-coupon bonds, i.e. no interest is paid on them to investors. However, they are issued at a discount and redeemed at face value.
    Therefore, the returns earned by investors in T-bills remains fixed throughout the bond tenure irrespective of the economic condition of the country.
  • Inflation Rate
    Investors may lose the capital invested if the rate of return gets lower than the inflation rate.

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