If I buy a Treasury Bill for $960 and I receives $1,000 at Maturity, is the $40 profit treated as a Capital Gain or Interest?

The earnings from holding a Treasury Bill are treated as Interest.

 

Interest income from Treasury bills, notes, and bonds is subject to federal income tax but is exempt from all state and local income taxes.

 

See this IRS webpage for more information.

See also this TurboTax article on the subject.