Treasury Bills vs FD: How to Choose the Best Option?

If you want to grow your money safely, treasury bills vs FD is a choice worth exploring. Both are low risk and give steady returns. They are backed by trusted institutions, making them reliable options for all kinds of savers.

In India, fixed deposits are a household favourite. Most people know and use fixed deposits. Treasury bills India are less common for everyday savers. They are still one of the safest investments. This guide covers the basics, explains what is a treasury bills and compares both so you can decide what works best for you.

What is a Treasury Bill?

A treasury bill is a short-term loan you give to the government. It is issued by the Reserve Bank of India for less than a year. You buy it at a price lower than its actual value. At maturity, you get the full value. Your profit is the difference between what you paid and what you received. For example, you pay ₹9,700 for a treasury bill worth ₹10,000. At maturity, you get ₹10,000 and earn ₹300 as profit.

Key points about treasury bills 

• For retail investors, tenures are 91, 182 or 364 days
• Sold through RBI auctions
• Among the safest investments because they are government-backed
• Can be sold early in the secondary market
• The treasury bills minimum amount for direct purchase is ₹10,000

Tax treatment of treasury bills

The profit from treasury bills taxable income is added to your total income and taxed as per your slab. The gains are treated as short-term capital gains as they usually mature within a year. No TDS is deducted on treasury bills taxable earnings.

What is a Fixed Deposit?

A fixed deposit is a savings plan from banks, NBFCs or post offices. You put in a lump sum for a fixed time at an agreed interest rate. At maturity, you get your money back with interest.

Key points about fixed deposits

• Tenures from 7 days to 10 years
• Interest rate is fixed when you open it
• Higher rates for senior citizens
• Can break before maturity, but a penalty may apply
• Bank deposits are insured up to ₹5 lakh per depositor under DICGC rules

Tax treatment of fixed deposits

Interest from FDs is taxable as per your income slab. Banks may cut TDS if your interest is above their limit. Senior citizens can claim an extra tax benefit under Section 80TTB.

Treasury Bills vs FD: Key Differences

Feature	Treasury Bills	Fixed Deposits
Issuer	RBI on behalf of the Government of India	Banks, NBFCs and Post Offices
Tenure	91, 182, or 364 days	7 days to 10 years
Returns	Earned as a discount yield	Earned as fixed interest
Liquidity	Can be sold early in the secondary market	Can break early with a penalty
Risk	Very safe due to government backing	Low risk, depends on the institution’s health
Minimum Investment	₹10,000 (direct purchase)	From ₹1,000 (varies by institution)
Tax Treatment	Taxed as per slab, no TDS	Taxed as per slab, TDS may apply

Return Comparison Between Treasury Bills and FD

When comparing treasury bills vs FD, the difference lies in how the earnings are given to you. Treasury bills are bought at a discount and redeemed at face value. Fixed deposits are booked at full value and earn interest on that amount.

For this example, we are assuming both have an annual rate or yield of 6.5%.

Investment type	Amount invested	Tenure	Annual rate / yield	Earnings before tax	How you get paid
Treasury Bill	You pay ₹9,675 for a ₹10,000 bill	182 days	~6.5% yield	₹325	You get ₹10,000 at maturity
Fixed Deposit	₹10,000	182 days	6.5% interest	₹325	You get interest along with your principal

For shorter terms, the total earnings can be similar. The real difference is in the payment method. T-bills give you the gain at maturity, while FDs can pay interest periodically or at maturity.

When to Choose Treasury Bills

Choose treasury bills if you:

• Have spare money for less than a year
• Want maximum safety
• Don’t need regular interest payouts

When to Choose Fixed Deposits

Choose fixed deposits if you:

• Want interest credited regularly
• Need options for short or long term
• Prefer simple banking products

Both treasury bills and fixed deposits are safe and reliable. Eventually, choosing between treasury bills vs FD comes down to your goals. Treasury bills are better for short-term needs backed with government securities. Fixed deposits are better for regular income and flexible tenure.

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FAQs on Treasury bills vs FD

Are treasury bills better than fixed deposits?

It depends on your goal. Treasury bills are good for short-term safety. FDs work better if you want regular interest and longer terms.

Which is better Treasury bond or a fixed deposit?

Treasury bonds are long-term government securities with market value changes. FDs offer fixed returns and flexible terms. You can choose between them based on your investment horizon and risk comfort.