T-Bill Auction Nov 2026: Tax on Interest Income Guide for Investors

What Happened?

On 04 November 2026, the Reserve Bank of India conducted auctions for 91-day, 182-day, and 364-day Treasury Bills. The 91-day T-Bills were accepted at ₹8,000 crore (cut-off price: ₹98.5511, YTM: 5.8970%), while the 364-day T-Bills were accepted at ₹7,000 crore (cut-off price: ₹93.7820, YTM: 6.6485%). The 182-day auction received no bids at the notified amount. This auction is important for individual investors and businesses looking for short-term, government-backed investment options with tax implications.

Background & Legal Context

Treasury Bills (T-Bills) are short-term government securities issued by the RBI on behalf of the Government of India. They are sold at a discount to their face value, and the difference between the purchase price and face value represents the interest income earned by the investor.

How T-Bill Interest is Taxed Under Income Tax Act 2025:

• Section 57 (Income Tax Act 2025): Interest earned on T-Bills is classified as "Income from Other Sources." This is the primary section governing taxation of T-Bill interest.
• No Special Exemption: Unlike dividend income (which has specific provisions under Section 50 of IT Act 2025), T-Bill interest is fully taxable at your applicable slab rate.
• TDS Implications (Section 194A, IT Act 2025): If you purchase T-Bills through a bank or broker, Tax Deducted at Source (TDS) at the rate of 10% (for individuals with PAN) or 20% (if PAN not provided) is usually deducted on the interest income. This rate applies for AY 2025-26 and AY 2026-27.
• Calculation Method: The interest on T-Bills is calculated on an accrual basis. Even though you receive money only at maturity, the interest is treated as income in the year it accrues (not when received). For 364-day T-Bills with a YTM of 6.6485%, this means significant accrued interest throughout the holding period.

What Does This Mean for You?

For Individual Investors:

If you invested in the 91-day T-Bills at the November 2026 auction with a 5.8970% yield, here's what happens:

• Interest Taxed Every Year: You must report the accrued interest income in your ITR for each assessment year, even though you haven't received the money yet. This is called "interest accrued but not received" and must be included under Schedule Other Sources (SO) in your Income Tax Return.
• TDS Credit: If TDS of 10% has been deducted (or 20% if PAN not provided), you will receive a TDS certificate (Form 16A). This can be claimed as a credit against your total tax liability, subject to the condition that your total income falls below the basic exemption limit.
• Return Filing Requirement: Even if your total income is below ₹5 lakh (basic exemption limit for AY 2026-27), you must file an ITR if you have TDS deducted during the year, or if you hold foreign assets, or if you have income from multiple sources. Interest on T-Bills qualifies as "income from other sources."
• Example Calculation: If you invest ₹10 lakh in 364-day T-Bills at 6.6485% YTM, your annual interest income will be approximately ₹66,485. At a 30% tax slab (including surcharge and cess), you'd owe ₹19,945 in income tax. If TDS of 10% (₹6,648.50) is deducted, you'd owe an additional ₹13,296.50 when filing your ITR.

For Business/Corporate Investors:

• Capital Gains Treatment (Section 48, IT Act 2025): If you're a business entity, the discount on T-Bills (difference between face value and purchase price) is treated as "short-term capital gains" if held for less than 12 months. This is added to your business income and taxed at your applicable corporate tax rate.
• No HRA or Standard Deduction: Unlike salary income, interest from T-Bills cannot be reduced by any standard deduction. It's added directly to your total income.
• GST Not Applicable: There is no GST on T-Bills or the interest earned from them, as financial services of this nature are exempt under GST law.

What Should You Do Now?

Immediate Actions:

• Track Your Purchase Price: Maintain records of your T-Bill purchase price (cut-off price in this case: ₹98.5511 for 91-day and ₹93.7820 for 364-day), the face value, and the date of purchase. This is crucial for calculating accrued interest.
• Calculate Accrued Interest Quarterly: For 364-day T-Bills, interest accrues over the entire year. Calculate accrued interest as on 31 March (end of financial year) to ensure you declare it correctly in your ITR.
• Claim TDS Credit in ITR: When you file your ITR for AY 2025-26 or AY 2026-27, ensure you attach the TDS certificate (Form 16A) and claim the TDS credit in the appropriate schedule. Do not miss this, as it reduces your tax burden.
• Use ITR Form 1 or Form 2: Individuals should use ITR Form 1 (Sahaj) if they have only salary + T-Bill interest income. Use ITR Form 2 (Sugam) if they have capital gains from T-Bills or multiple income sources.
• Consider Tax Planning: If you're in a lower tax slab, discuss with a tax advisor whether to invest in 364-day T-Bills (higher yield of 6.6485%) versus 91-day T-Bills (lower yield of 5.8970%). The 364-day option gives better returns but requires you to carry accrued interest in your books for 12 months.

For the Next Auction (If You Plan to Bid):

• Always provide your PAN to ensure TDS is deducted at 10% (not 20%).
• Use your savings account or investment portfolio account to track T-Bill holdings separately for easy tax compliance.
• Plan your investments considering your total income projection for the financial year to optimize tax liability.

Key Takeaways

• Interest Income Taxable Every Year: T-Bill interest is taxed under Section 57 (IT Act 2025) as "Income from Other Sources" and must be reported in your ITR for every assessment year, even before you receive the money (on accrual basis).
• TDS at 10% if PAN Provided: Tax will be deducted at source at 10% for individuals with PAN (20% without). Always claim this TDS credit in your ITR to reduce your tax liability.
• 364-Day T-Bills Better Than 91-Day (Yield-wise): The November 2026 auction shows 364-day T-Bills yielding 6.6485% versus 91-day at 5.8970%. Higher yield means higher taxable income, so plan accordingly.
• ITR Filing Mandatory if TDS Deducted: Even if your total income is below ₹5 lakh, you must file an ITR in the year TDS is deducted. Non-compliance attracts penalties under Section 271B (IT Act 2025).
• No GST on T-Bills: Unlike other investments, T-Bills and their interest are fully exempt from GST. Only income tax applies.

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