Treasury Bills 91-Day 182-Day 364-Day Tax Implications 2026

What Happened?

The Reserve Bank of India (RBI) has conducted auctions for 91-Day, 182-Day and 364-Day Treasury Bills (T-Bills) in late October 2026. These short-term government securities are issued at a discount and redeemed at face value on maturity. For taxpayers in India, understanding the tax treatment of T-Bills is critical for correct income reporting and TDS compliance in Assessment Year 2026-27.

Background & Legal Context

Treasury Bills are short-term debt instruments issued by the Government of India through RBI. The difference between the purchase price and face value represents interest income to the investor. Under the Income Tax Act 2025, the tax treatment of T-Bills income falls under specific sections that differ significantly from regular interest income.

Key Sections Under Income Tax Act 2025:

• Section 55 (Capital Gains from Government Securities): The discount on T-Bills is taxed as capital gains, not ordinary income. Since T-Bills have a maturity period of less than 12 months (91, 182, or 364 days), gains are treated as short-term capital gains (STCG).
• Section 92 (Valuation of T-Bills): T-Bills must be valued at fair market value on the valuation date. This applies to individuals holding T-Bills in their portfolio assessment.
• Section 194A (TDS on Interest): Though T-Bills interest (discount) is capital gains, certain entities paying interest on government securities must deduct TDS. However, since T-Bills are issued at discount and not as interest-bearing instruments, standard TDS under 194A may not apply in the traditional sense.
• Section 10(15)(iv) (Exemption for HUF and Minors): Specific exemptions available for certain categories of investors remain applicable.
• Schedule VI (Valuation Rules): The latest Income Tax Act 2025 specifies detailed valuation rules for securities, including government bonds and T-Bills.

Note: Old Section 55 of Income Tax Act 1961 had similar provisions, but the 2025 Act has refined definitions and valuation methods. For Assessment Year 2026-27, taxpayers must follow Income Tax Act 2025 provisions only.

What Does This Mean for You?

For Individual Investors:

• Capital Gains Treatment: If you purchase 91-Day T-Bills at Rs. 98,000 and receive Rs. 100,000 on maturity, your gain of Rs. 2,000 is short-term capital gain (STCG). This will be added to your total income and taxed at your applicable slab rate (0%, 5%, 20%, 30%, etc.) depending on your total income for AY 2026-27.
• No TDS at Source (Usually): RBI does not deduct TDS when you purchase T-Bills through primary auction. However, if you purchase T-Bills from secondary market through a bank or broker, TDS provisions may apply depending on the nature of transaction. Always verify with your bank.
• Reporting in ITR: You must report T-Bill gains in Schedule CG (Capital Gains) of your Income Tax Return for AY 2026-27. Failure to report correctly can trigger scrutiny assessment under Section 143(2).
• Holding Period Matters: Since all three T-Bill types (91, 182, 364 days) mature within 12 months, the gain will always be short-term. There is no benefit of long-term capital gains indexation under Section 48.

For Corporate Investors:

• Profit on Investment: Corporates purchasing T-Bills must treat the discount (gain) as business income under Section 28(i), not capital gains. This is because securities dealing is generally considered part of business for companies.
• MAT (Minimum Alternate Tax): If T-Bill gains push your tax liability below the MAT threshold, Book Profit under Section 115JB may apply. Calculate T-Bill gains correctly to avoid MAT adjustments.
• TDS Provisions: Corporates receiving payment of T-Bills on maturity should not face TDS deduction by RBI. However, if secondary market transactions occur, ensure proper TDS compliance under Section 194A.

For Non-Residents and HUFs:

• Non-Residents (NRIs/NRE): Gains on T-Bills are income from India and taxable in India. If you are NRI for AY 2026-27, file your return disclosing all T-Bill transactions. TDS is typically not deducted on T-Bill auctions, so you must self-assess and pay tax.
• Hindu Undivided Families (HUFs): T-Bill gains in HUF are taxed in the hands of the HUF at applicable slab rates. File separate ITR for HUF as a separate entity.

What Should You Do Now?

Immediate Action Items:

1. Gather T-Bill Documents: Collect your T-Bill purchase confirmation (from RBI/bank), maturity statement, and the amount received. Note the exact dates of purchase and maturity for AY determination.
2. Calculate Exact Gain: Compute the difference between redemption value and purchase price. This is your short-term capital gain for AY 2026-27. Keep a separate schedule of all T-Bill transactions.
3. Check TDS Deduction: Review bank statements and correspondence. If any TDS was deducted, collect Form 26AS and TDS certificate. If TDS was wrongly deducted on T-Bills, you can file for refund under Section 245.
4. ITR Preparation: For AY 2026-27, prepare your Income Tax Return with T-Bill gains properly reported in Schedule CG. Do not omit or under-report, as RBI data matching is increasingly common.
5. Maintain Records: Keep all T-Bill purchase agreements, confirmations, and statements for 6 years (as per Section 92 and archival requirements). Auditor reports may request these.
6. Secondary Market Transactions: If you sold T-Bills before maturity through secondary market, report the selling price as redemption value and compute gain accordingly. TDS may apply if the seller is a bank or authorized dealer.

For Businesses and Investors:

• Review your investment policy to classify T-Bill transactions (trading vs. investment) for correct accounting and tax treatment.
• If you are a financial institution or NBFC, separate T-Bill gains from other business income for clarity in audit schedules.
• For portfolio investors, coordinate with your CA to ensure cost inflation indexation is not claimed (as T-Bills are short-term).

Key Takeaways

• T-Bill gains are short-term capital gains (STCG) under Income Tax Act 2025 Section 55, taxed at your slab rate for individuals and as business income for corporates.
• The 91-Day, 182-Day, and 364-Day maturity means all gains are STCG; no long-term capital gains benefit is available.
• TDS is typically not deducted on T-Bill purchase or maturity, but may apply on secondary market sales; always verify with your bank.
• Report all T-Bill transactions in Schedule CG of your AY 2026-27 ITR; omission can trigger scrutiny or penalty under Section 270A.
• Maintain complete documentation (purchase confirmations, maturity statements, bank records) for at least 6 years for statutory compliance and audit purposes.

Important Reminder: This update applies to Treasury Bills auctioned in October 2026 and onwards, with tax implications for Assessment Year 2026-27 onwards. If your T-Bill transactions span multiple financial years (e.g., purchased in FY 2024-25, matured in FY 2025-26), report gains in the financial year of maturity.

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