Last Updated on October 8, 2026 9:30 pm by INDIAN AWAAZ
BIZ DESK
Treasury bills and government bonds are both issued by the Government of India, so both carry sovereign backing. The difference is time: T-bills mature within a year, while government bonds (dated G-Secs) run from a few years to several decades.
That single difference changes how you earn, how much prices move, and which goals each one suits.
What are Treasury Bills?
Treasury bills (T-bills) are short-term debt instruments issued by the central government through the RBI. They come in three tenors: 91 days, 182 days, and 364 days.
T-bills do not pay interest. They are issued at a discount and repaid at face value on maturity. Your return is the difference. In that sense, they work like short-term zero-coupon bonds.
RBI holds T-bill auctions every week, usually on Wednesdays.
What are Government Bonds?
Government bonds, or dated G-Secs, are long-term securities with a fixed or floating coupon, usually paid every six months. They return the face value at maturity, and tenures typically range from 2 years to 40 years.
T-bills vs G-Secs at a glance
| Feature | Treasury bills | Dated G-Secs |
| Tenure | 91, 182 or 364 days | Usually 2 to 40 years |
| How you earn | Bought at a discount, repaid at face value | Regular coupons plus face value at maturity |
| Income stream | None until maturity | Typically half-yearly |
| Interest rate risk | Very low | Moderate to high, rising with tenure |
| Reinvestment risk | High, as money returns often | Lower, as the rate is locked longer |
| Minimum (Retail Direct) | ₹25,000 face value | ₹10,000 face value |
| Credit risk | Sovereign | Sovereign |
How are T-bill returns calculated?
T-bill yield is calculated from the discount:
\text{Yield} = \frac{\text{Face value} – \text{Price}}{\text{Price}} \times \frac{365}{\text{Days to maturity}} \times 100
Say a 91-day T-bill with ₹100 face value is issued at ₹98.70.
Yield = (100 − 98.70) ÷ 98.70 × 365 ÷ 91 × 100 = about 5.28% a year.
If you invest in ₹1,00,000 face value, you pay ₹98,700 and receive ₹1,00,000 after 91 days.
Figures are illustrative. Actual cut-off prices are set in each auction.
Interest rate risk: the biggest difference
Bond prices move opposite to interest rates. The longer the bond, the bigger the move. A T-bill matures within months, so a rate change barely affects its price. A 30-year G-Sec can lose or gain a meaningful share of its value when rates shift. This matters only if you sell before maturity. Held to maturity, you receive the face value either way.
Reinvestment risk: the other side
T-bills protect you from price swings but expose you to reinvestment risk. Every few months, your money comes back and must be reinvested at whatever rate prevails.
If rates fall, your next T-bill earns less. A long G-Sec locks in today’s rate for years. Which risk matters more depends on your goal.
Taxation
- T-bills: The gain, which is the difference between the purchase price and face value, is taxable at your slab rate.
- G-Secs: Coupons are taxable at your slab rate. If you sell before maturity, gains are taxed as capital gains based on the holding period.
Tax is generally not deducted at source on central government securities, so you need to report the income yourself.
How to Buy T-bills and G-Secs?
- RBI Retail Direct: Open a free gilt account and place non-competitive bids in weekly auctions, or buy in the secondary market.
- Stock exchange non-competitive bidding: Through a broker on NSE or BSE, with securities credited to your demat account.
- Online bond platforms: Some platforms list government securities alongside corporate bonds.
Which should you choose?
Choose T-bills if you are parking money for under a year, building an emergency reserve, or waiting to deploy funds. They also work when you expect rates to rise and want flexibility to reinvest.
Choose G-Secs if you want regular income or have a long-term goal and can hold to maturity. They suit you when you want to lock in current yields.
Many investors use both. If you want shorter commitments with a higher yield than T-bills, compare rated short-term bonds, keeping in mind that corporate bonds carry credit risk that sovereign securities do not.
FAQs
Are T-bills safer than government bonds?
Both carry sovereign backing. T-bills have much lower interest rate risk because of their short tenure.
Do T-bills pay interest?
No. They are issued at a discount and repaid at face value. The difference is your return.
Can I sell a T-bill before maturity?
Yes, in the secondary market, though most retail investors hold to maturity.
What is the minimum investment in T-bills?
Through RBI Retail Direct, the minimum is usually ₹25,000 face value.
Which has better returns, T-bills or G-Secs?
Longer G-Secs usually yield more than T-bills, but not always. The yield curve can flatten or invert depending on market conditions.