The main difference between Treasury Bills and Fixed Deposits is that Treasury Bills are short-term loans to the government, making them very safe. On the other hand, Fixed Deposits are savings placed in banks that earn interest over a set period, offering predictable returns.
Content ID:
- What Is Treasury Bill In India?
- What Is Fixed Deposit?
- Fixed Deposit Vs Treasury Bills
- Difference Between Fixed Deposit And Treasury Bill – Quick Summary
- Treasury Bills Vs Fixed Deposit – FAQs
What Is Treasury Bill In India?
A Treasury Bill in India is a short-term debt instrument issued by the Government of India. It’s used by the government to meet its short-term financial needs. Treasury Bills are considered one of the safest investments because they are backed by the government guarantee.
In more detail, Treasury Bills in India are issued for three different durations: 91 days, 182 days, and 364 days. Investors do not receive interest payments during the tenure of the bill. Instead, T-bills are issued at a discount and redeemed at face value at maturity. The difference between the purchase price and the redemption value is the investor’s earnings, making it a zero-coupon security.
What Is Fixed Deposit?
A Fixed Deposit is a financial instrument provided by banks that offers investors a higher rate of interest than a regular savings account, until the given maturity date. It requires a lump sum of money to be deposited for a fixed period.
Fixed Deposits are a popular investment choice in India due to their safety and predictable returns. The interest rate for an FD is fixed at the time of deposit and remains the same throughout the term, regardless of market fluctuations. Investors can choose the period for which they wish to keep their money in an FD, which can range from 7 days to 10 years. Upon maturity, the investor receives the principal amount along with the accumulated interest.
Fixed Deposit Vs Treasury Bills
The main distinction between Fixed Deposits and Treasury Bills is that fixed deposits are bank investments that pay a fixed interest rate for a set period of time, resulting in predictable earnings. In contrast, Treasury Bills are short-term government securities that are sold at a discount and mature at face value, with the difference representing the investor’s return.
| Feature | Fixed Deposit | Treasury Bill |
| Investment Type | Bank-based savings | Government security |
| Term | Ranges from 7 days to 10 years | Usually 91, 182, or 364 days |
| Risk | Relatively low, depends on bank stability | Very low, backed by government |
| Returns | Fixed interest rates | Discount on face value |
| Liquidity | Early withdrawal penalties may apply | Highly liquid, can be sold on secondary market |
| Suitability | Investors seeking stable returns over time | Investors looking for short-term, low-risk options |
| Taxation | Interest is taxable, TDS applicable | Market related gains are taxable |
Difference Between Fixed Deposit And Treasury Bill – Quick Summary
- The primary difference between Treasury Bills and Fixed Deposits is that T-bills are short-term government loans offering high safety, whereas FDs are bank savings providing fixed interest over time.
- Treasury Bills in India are short-term, government-backed securities issued in three tenures without interest payments, offering earnings through the purchase and redemption price difference.
- Fixed Deposits are bank-provided instruments with higher interest rates than savings accounts, offering safety and predictable returns over terms ranging from 7 days to 10 years.
- The key distinction between FDs and T-bills lies in their investment structure: FDs offer fixed interest rates for predictable earnings, while T-bills are sold at a discount for profit at maturity.
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Treasury Bills Vs Fixed Deposit – FAQs
The key difference between fixed deposit and treasury bill is that Fixed Deposits are bank savings with a fixed interest rate, while Treasury Bills are government loans that earn profit through a buy-and-sell price difference.
When a T-bill matures, the government pays you its face value. The profit is the difference between what you initially paid for the T-bill and its face value at maturity.
In India, Treasury Bills can be purchased through the auctions conducted by the Reserve Bank of India (RBI). Investors have the option to participate directly or through their banking institutions.
Interest on FDs is taxable, but no TDS is deducted if the interest earned is below Rs 40,000 in a financial year. For senior citizens, this limit is Rs 50,000.
The time period for a Fixed Deposit (FD) varies widely, ranging from 7 days to 10 years. Investors have the flexibility to choose the term that best suits their financial goals and needs.
Profits earned from selling these T-bills on the secondary market are subject to capital gains tax.
Fixed Deposits are considered to be safe investments as they are backed by the stability of banks. To ensure the utmost safety of your deposit, it is advisable to invest with reputable and well-established banks.
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