Buying T-bills (Treasury Bills) and Government Bonds directly v/s Investing in Liquid & Overnight Funds

[jayy18]

@ngocthanh2015 But FDs also get taxed as per income bracket right? So I think TBills are still better than FDs.

 

[ngocthanh2015]

@jayy18 In that way yes but if u compare it to debt fund u will pay tax when u redeem the units so it will get keep reinvested without any tax

 

[jayy18]

@ngocthanh2015 But if we have a time period of 3 months, then it doesn't matter right. STCG will have to be paid whether it's FD, TBills or Liquid funds or Ultra Short Term MF

Edit - OP has a time duration of 4 to 5 months. So tax will be the same regardless. We should focus on what gives more return.

 

[ngocthanh2015]

@jayy18 First Fixed income doesnt come under capital gains i.e. STCG or LTCG.

All fixed income are taxed under normal income slabs in india with some exceptions.

Now if u invest in funds u will not realize any gains until u redeem. It can be forever

 

[jayy18]

@ngocthanh2015 OP has a time duration of 4-5 months. It has to be redeemed.

Plus STCG on debt funds is calculated on tax slab. Same as FD interest. So its the same.

 

[resjudicata]

@kuskus1

Will there be a lot of hassle when I have to redeem them after their maturity??

On maturity the funds would be credited to your associated bank account.

The nightmare starts if you want to sell before maturity.

 

[jt5542002]

@resjudicata

The nightmare starts if you want to sell before maturity.

What nightmares? Lack of liquidity?

 

[resjudicata]

@jt5542002 Yes. For smaller quantities. And awful rates.

These are normally dealt in multiples of crores by mutual funds/banks/larger corporates so the market for mango man quantities like ours is practically non existent.

 

[sixteeen7leven]

@kuskus1 The current yield on T bills is higher than FDs of the similar term. You can invest directly in 3m 6m or 1Y tbills from RBI direct.

A video explaining the current situation but it may not stay the same.

 

[zashmaster]

@kuskus1 A point that I did not see....

Often people compare previous year return of liquid funds and future yield of t-bilss. This can be misleading when interest rates have changed. You can look at the YTM of the liquid fund for a better comparison. e.g the YTM of Parag Parikh liquid is a bit more than 5.9., the expense ratio is 0.16. So you can compare a number like 5.8% with the 91-day t-bill yield.

There is still a difference in possible returns, but this could be compensated by the ease and liquidity of the liquid fund.

 

[lt11]

@kuskus1 Interested in the same. Also how do we buy T Bills? I have Zerodha, Upstox and Groww accounts.

 

[bloodmoon]

@lt11 Open your account on RBI direct and buy & sell there its very good

 

[lotrnut2486]

@bloodmoon Have you already done a trade there?

 

[resjudicata]

@lt11 https://support.zerodha.com/category/mutual-funds/government-securities/articles/buy-gsecs

 

[resjudicata]

@lt11 RBI retail

 

[resjudicata]

@lt11 You can buy from zerodha coin too. They have a video or an article on how to do that

 

[simeon93]

@resjudicata Hi, do you know if there's any difference between buying through Coin and buying t-bills through RBI direct?

 

[resjudicata]

@simeon93 Coin is a broker. I think you can trade the bonds same cannot be done in RBI direct portal

 

[simeon93]

@resjudicata I did not find any option to buy from secondary market. RBI direct has options.

 

[esthergwb]

@simeon93 you can buy from secondary market but you need to understand the charges.

I buy tbills from rbiretaildirect. I buy 91d or 182d only as it gives some interest for my cash in hand. I usually do 20L at a time.

What I felt is on zerodha auction bidding there is brokerage charges of 0.06% (which comes to 1200/- for me)

You won't find liquidity on secondary market but even if you find the STT, stamp duty and othes make up around 0.12%. Which is double the bidding cost.

If you do the same in rbiretaildirect you will not have these charges and absolute gurantee your funds are safe.

However the down side is you don't have liquidity in rbiretaildirect bids. Even secondary market the bid/ask prices diverge. I am not sure if brokers allow it to pledge which will be beneficial for traders. So auction bidding or buying from secondary market may have some advantages