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  • Category: Tax Planning

    What do you mean by Government T-bills ?

    What do you mean by Government T-bills ?
    Is it beneficial and safe to invest in T-bills ?
    Are they tax free ?
    What is the current rates of T-Bills ?
    Any site for finding updates about T-Bills in India?
  • #27374
    Government T-bills or Treasury bills are the bonds issued by Government. They are also known as G-sec (government Securities) and Sovereign securities.

    Indian governement is one of the largest borrowers in the country. This borrowing is done to meet the shortfall in receipt and expenditure of government.
    To cover this governement issues bonds through Reserve bank of India. This bonds are generally long maturity bonds with tenure in upward of 10 years and carru a specified intrest rate. (However short term g-secs are also issued).

    Investment in such bonds are considered as safest as it is assumed that governement will not default and hence intrest rate offered on such securities is considered as benchmark by various other issuers.

    Generally these bills are auctioned by RBI to institutional investors and they are highly liquid in trading.
    Generally it is not possible for Individual investors to take part in this tradig due to high investment required and these are traded between institutions.

    These bonds are not Tax-free.

    Calculation of Intrest rates of such instruments is highly complex and common terms used for return are yield and rate. Currently 10 yr benchmark g-sec are offering approx. 7.6%

    Due to its highly secure nature, intrest on such instruments are less than what offered by banks as FD. Beside trading in g-sec is highly complex and requires lot of understanding of financial markets.
    Hence it is not adviseable for individuals to participate in such trading. However if you still want to invest you can route your money through debt schemes of various mutual funds which invest in g-sec.

  • #27392
    Govt.Treasury bills is a short term promissory notes issued by the Govt.of India at a discount for 14 days,182days and 364 days respectively.It is a money market instrument.
    T.Bills are issued at a discount and their yields can be calculated by the following formula:

    Y=(F-P)/P *365/M*100

    Y = Yields, F=Face value, P=Issue/Purchase Price AND M=Maturity.

    TBs can be purchased by any person,firm,company corporate body and Institutions.This is issued in lots of Rs.25000(14 days),Rs 100000(364days),Rs.100000 and multiples thereof(182days).
    All are on the basis of auction.And DFHI is the major auctioning authority.
    Investors who wish to purchase these bills on days other than in the fortnightly auction can do so in the secondary market.If available in its stock, DFHI also sell them at its ruling rate.Due to assured liquidity, investment can easily be converted in to cash.
    Income is taxable.You have to know details about the topic before dealing.

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