Fixed Deposit and Treasury Bills

Fixed Deposits (FDs) and Treasury bills are great investment tools if you have a low-risk appetite. FDs are mostly an investment service offered by banks and NBFCs, providing good interest returns compared to average saving account returns. The T-bills or treasury bills, on the other hand, are money market instruments. The government offers T-bills when it is in need of some capital. Simply put, it is a short-term borrowing tool the government uses to borrow some funds for a limited time. And, those who lend money to the government earn interest on the loaned money. In case you don't know, treasury bills come with three-term periods that are for 91 days, 182 days, and a year.

You can choose any of these term periods to get the returns. The return of T bills is higher as compared to FDs. However, both of these investment options are safe with guaranteed returns. To help you decide which of these two options is best for you, we have tried to include every piece of information here. You would be in a better position to weigh the pros and cons of FDs and T-bills and make a well-informed decision.

As mentioned, the treasury interest rates are generally better as compared to the FD returns. The gain you get with an FD is 6%. While T-bills can get interest return up to 6.40 per cent for 2.9 months, 6.52 per cent for 5.9 months and 6.64 per cent for a year. However, if you still want to invest in FDs, you can go for good company's FDs that can yield you a higher interest in your money.

When it comes to accessing and withdrawing your investment, the FD has a withdrawal option before maturity. But, it comes with a penalty fee and may also negatively affect your interest gain. In the case of the T-bills, you can access your funds anytime as it is a short-term investment. You can quickly redeem your funds at auctions organised frequently at a discount rate. Thus, the T bills offer more liquidity as compared to FDs.

Both FD and the treasury bills are safe, low-risk investments. Banks or companies offer the FD as safe as a savings account, thus cutting the risk to zero. And the t-bills are backed by the government with guaranteed returns. Government always has funds, so you know you're going to get your capital back, which is not the case when investing in ordinary shares of companies.

The interest you would gain on the FD money is taxable. To be more precise, earning an interest of ₹10,000 in a year is taxable. For T bills, you won't have to pay any taxes on the returns, but you may be charged for services rendered by the bank.

A Treasury bill is a good option for quick short-term investment to earn some extra money. But, they may fall flat if you are looking for a long-term investment with hefty returns. For novice or/ and low-risk investors, an FD would be a better option, even though it may not deliver you a considerable amount of returns. An online FD interest rate calculator will aid you in making a wise financial decision by letting you know the returns on investment and maturity amount beforehand. But, both FDs and treasury bills are safe investment options that are low-risk investments for your portfolio. Now that you know the benefits and drawbacks of each tool, you can make an informed choice as per your preference and needs.