TREASURY BILL  (Syllabus: GS Paper 3 – Economy)

Context: The Government of India, in consultation with the Reserve Bank of India, recently notified the calendar for the issuance of Treasury Bills for the quarter ending June 2024.

Treasury Bill 

• About: Short term (up to one year) borrowing instruments of the Government of India or by a central authority of any country which enable investors to park their short term surplus funds while reducing their market risk.
• Issued by: The Central Government.

oThe State governments do not issue any treasury bills.

• Auctioned by: Reserve Bank of India (RBI)
• Minimum Investment: As per the regulations put forward by the RBI, a minimum of Rs. 25,000 has to be invested by individuals willing to procure a short term treasury bill.
• Types of Treasury Bills: presently issued in three tenors, namely, 14 days, 91 days, 182 days and 364 days.

oThe 91-day T-Bills are issued on a weekly auction basis while 182-day T-Bill auction is held on Wednesday preceding Non-reporting Friday and 364-day T-Bill auction on Wednesday preceding the Reporting Friday.

oIn 1997, the Government had also introduced the 14-day intermediate treasury bills.

• Eligible Buyers: Individuals, Firms, Trusts, Institutions and banks

oInterest on the treasury bills is determined by market forces.

oTo get money under repo, banks give the RBI treasury bills. 

oThey can also hold it if they need to meet their Statutory Liquid Ratio (SLR) standards.

• Taxation: Short-term capital gains (STCG) on these bills are subject to STCG tax at rates determined by the investor's income tax bracket.

oHowever, retail investors do not have to pay any tax deducted at source (TDS) upon redemption of these bonds, minimizing the difficulties of claiming the same through income tax returns if they do not fall into the taxable income level.