I'm a little confused about what is taxable interest and when tax is due for Treasury Bills.
To illustrate, say I buy a 6 mo bill for $10,000 from Treasury Direct. On Issue Date, Treasury Direct refunds $100 to my bank account. Since Treasury Direct labels it "refund" I assume that is not interest, and I purchased the Bill for $9,900. Am I right or wrong?
On maturity, I get the full 10,000 back to my bank account. I assume that the $9,900 is my principal, and $100 is my interest. Am I right or wrong?
If I'm right, the $100 is taxable interest, but when is it taxable? At time of payment? Or is it accrued since time of purchase?
I hope my question is clear enough.
Thanks