How are T-Bill taxed?

What is the tax treatment of 91,182,364T-Bills?
Replies (11)
Quick Summary
This discussion delves into the tax treatment of Treasury Bills (T-Bills). While some suggest T-Bills with maturities under 3 years are treated as Short Term Capital Gains (STCG), others argue that since they are held in dematerialised SGL accounts and not physical scrips, the discount realised upon maturity should be taxed as 'income from other sources' according to an individual's applicable tax slab. This distinction is crucial as it can significantly impact the tax liability.

Pls elaborate

All below 3 yrs tenure are treated as STCG.

Transfer of capital asset is taxsble. T BILLS ARE Short tetm US GOVERNMENT DEBT OBLIGATION BACKED BY TREASURY DEPARTMENT .

T Bills auctioned by RBI!
This auction are always necessary
Mr Dhirajlal ji : T Bills are not issued in scrip form but are Cr in SGL account.Thus, how can we treat it as STCG ? please show the sec in relevant IndAS.

Treasury bills can be issued in a physical form as a promissory note or dematerialized form by crediting to SGL account (Subsidiary General Ledger Account).

Treasury bills or T-bills, which are money market instruments, are short term debt instruments issued by the Government of India and are presently issued in three tenors, namely, 91 day, 182 day and 364 day. Treasury bills are zero coupon securities and pay no interest. Instead, they are issued at a discount and redeemed at the face value at maturity. For example, a 91 day Treasury bill of ₹100/- (face value) may be issued at say ₹ 98.20, that is, at a discount of say, ₹1.80 and would be redeemed at the face value of ₹100/-. The return to the investors is the difference between the maturity value or the face value (that is ₹100) and the issue price (for calculation of yield on Treasury Bills

The Public Debt Office (PDO) of RBI, acts as the registry and central depository for G-Secs. They may be held by investors either as physical stock or in dematerialized (demat/electronic) form. From May 20, 2002, it is mandatory for all the RBI regulated entities to hold and transact in G-Secs only in dematerialized (SGL) form.

SGL Account: Reserve Bank of India offers SGL Account facility to select entities who can hold their securities in SGL accounts maintained with the Public Debt Offices of the RBI. Only financially strong entities viz. Banks, PDs, select UCBs and NBFCs which meet RBI guidelines are allowed to maintain SGL with RBI.

An investor who purchases a T bill  can expect to receive a return from one or more of the following sources:

  • The coupon interest payments made by the issuer; Which is nil in this case

  • Any capital gain (or capital loss) when the bond is sold/matured.

An investor who purchases a T bill  can expect to receive a return from one or more of the following sources:

  • Any capital gain (or capital loss) when the bond is sold/matured.

Please note they are not "issued in scrip form" and are "credited to SGL account " thus the income resulting from "discount " realisation means it should be treated as "income from other sources " and taxed as per individual tax slab applicable. A credit to an "account " is of the "nature of "interest on account of discount realization " and thus cannot be treated as an "asset transfer " nor can it be treated as a "security ".The "discount " is nothing but prepaid interest on "loan amount " for corresponding number of days.
If treated as STCG then it's a big loss in the form of STCG tax!
It's very tricky situation but careful analysis should be done.

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