Bonus shares give you more shares, not more money

What is a bonus issue?

A bonus issue is a company giving its shareholders extra shares at no charge, in proportion to the shares they already hold. Share.Market describes it as capitalising free reserves or securities premium. Money the company had already earned or collected moves into share capital, and new shares are issued against it.

Nothing comes into the company and nothing goes out of it. Reserves shrink by the amount share capital grows, so net worth is the same on both sides. Kotak Neo makes the same point. A bonus cannot come out of revaluation reserves, Share.Market adds, only out of reserves built from actual profits or premium collected in cash.

Reading the ratio

A bonus ratio is written as bonus shares to shares held. A 1:2 bonus gives 1 bonus share for every 2 held, so 200 shares become 300. A 1:1 bonus doubles the count. Kotak Neo's own example runs the other way round, a 4:1 bonus meaning four extra shares for each one held, so 10 shares become 40. Read the company's announcement for which order it uses before you do any arithmetic.

Why does the price fall when the shares rise?

Because the company is the same size and there are more shares sharing it. Share.Market gives the exchange's adjustment factor as (A+B)/B, where A:B is the bonus ratio. Divide the old price by that factor to get the adjusted price.

Here is the arithmetic on a holding of 1,000 shares at ₹500, which is ₹5,00,000.

• A 1:1 bonus has a factor of (1+1)/1 = 2. The holding becomes 2,000 shares at ₹250, which is ₹5,00,000.
• A 1:2 bonus has a factor of (1+2)/2 = 1.5. The holding becomes 1,500 shares at ₹500 ÷ 1.5 = ₹333.33, which is ₹5,00,000.
• A 2:1 bonus has a factor of (2+1)/1 = 3. The holding becomes 3,000 shares at ₹500 ÷ 3 = ₹166.67, which is ₹5,00,000.

Source: factor formula from Share.Market, read 2026-10-05. The prices are illustrative.

The market price after the event is set by trading, so it can differ from the adjusted figure on any day.

My view: the word "free" is the least useful thing in a bonus announcement. A bonus is a change of denomination. What decides whether the holding was worth owning is the business behind it, and that question is the same before and after.

What are the dates that decide who gets the shares?

Two dates matter. The record date is the day the company checks its register to see who holds the shares. The ex-date is the first day the shares trade without the bonus attached. You must hold the shares in your demat account before the ex-date to qualify.

As of the Share.Market page read on 2026-10-05, the ex-date and the record date fall on the same day under India's T+1 settlement cycle. A purchase made on that day settles on T+1, after the record has been taken, so it does not qualify. The page also notes that a SEBI circular of September 2024 shortened the credit timeline. Bonus shares are now credited within two working days after the record date, against up to 15 days earlier.

Why buying before the ex-date does not buy the bonus

On the ex-date the adjusted price drops by the factor above. Take 1,000 shares bought at ₹500 the day before a 1:1 ex-date. You hold 2,000 shares at ₹250. You paid ₹5,00,000 and own ₹5,00,000.

How is a bonus issue different from a stock split?

Both raise the number of shares and lower the price per share, and neither changes the value of what you hold. They differ in the company's books. In a bonus issue the face value of each share stays the same and reserves move into share capital. In a split each share is divided, the face value shrinks in the same ratio and reserves do not move.

Share.Market's example makes the contrast concrete. You hold 100 shares with a face value of ₹10 at ₹500. After a 1:1 bonus you hold 200 shares, each still with a ₹10 face value, at about ₹250. After a 1:1 split you also hold 200 shares at about ₹250, but each now has a face value of ₹5.

Source: Share.Market and Kotak Neo, both read 2026-10-05.

On your statement the two look nearly the same. Which one happened matters for the tax clock.

How are bonus shares taxed?

Receiving bonus shares is not a taxable event. StudyCafe and Geojit both state that no tax arises at allotment and that tax applies only when the shares are sold. Three points then govern the sale, and all of them come from the bonus lot being treated as a separate purchase.

The bonus lot has no cost

The cost of acquisition of the bonus shares is treated as nil. The whole sale value of that lot is therefore the capital gain. Your original shares keep the price you paid for them, because the bonus does not change it.

The holding period starts again

The holding period of the bonus lot is counted from the date of allotment, not from the date you bought the original shares. For listed shares, StudyCafe gives the line as 12 months or less for short-term and more than 12 months for long-term.

The two lots are computed separately

Geojit states that capital gains on the original and the bonus shares are calculated separately, each on its own cost and its own holding period.

The three points at ₹5 lakh

You bought 1,000 shares at ₹100 each, ₹1,00,000, more than a year ago. A 1:1 bonus gives you 1,000 more. The adjusted price is ₹250, and you sell all 2,000 within 12 months of the allotment, for ₹5,00,000.

• The original lot sold for 1,000 × ₹250 = ₹2,50,000. The cost was ₹1,00,000, so the gain is ₹1,50,000, and it is long-term.
• The bonus lot sold for 1,000 × ₹250 = ₹2,50,000. The cost is nil, so the gain is ₹2,50,000, and it is short-term because the clock started at allotment.
• The two gains add to ₹4,00,000, which equals the ₹5,00,000 proceeds less the ₹1,00,000 you paid. The bonus leaves the total where it was and moves part of it into the short-term column.

StudyCafe lists the rates for listed shares where Securities Transaction Tax applies. Short-term gains are taxed at 20 percent for transfers from 23 July 2024. Long-term gains are taxed at 12.5 percent on gains above ₹1.25 lakh in a financial year. On the example above, ignoring cess and any other gains in the year:

• Short-term on the bonus lot: 20% × ₹2,50,000 = ₹50,000.
• Long-term on the original lot: 12.5% × (₹1,50,000 − ₹1,25,000) = 12.5% × ₹25,000 = ₹3,125.
• Total: ₹53,125.

Source: rates from StudyCafe, read 2026-10-05. The example is illustrative and explains how the rules fit together. It is not advice on any holding.

The bonus lot stays short-term for a year after allotment, so the same sale a year later sits in a different bracket. Treat the two lots as two positions and check the allotment date on your statement.

StudyCafe also describes section 94(8). It disallows a loss on original shares sold within a set period around a bonus issue and adds that loss to the cost of the bonus shares you keep.

What should a holder check when a bonus is announced?

Four checks take ten minutes with a statement open.

• The ratio and which order it is written in. A 1:2 and a 2:1 differ by a factor of two.
• The record date and ex-date, and whether your shares are in the demat account before the ex-date.
• The adjusted price and share count after the ex-date, multiplied together, against the value before. If they differ by more than the day's market move, something was misread.
• The allotment date, because it starts the holding period for the new lot and fixes the cost basis at nil.

Where this sits with other corporate actions

A bonus issue is one of several ways a company changes the shares you hold without asking you for money. What a buyback of shares is and what a company pays you to leave covers the one where cash does move. What market cap is and why a crash erases no money explains why count times price is the figure to watch. The glossary pages on short-term against long-term gains on shares and the long-term capital gains tax on equity carry the tax definitions used above.

A bonus gives you a new share count and a new holding period, and the price per share gives back exactly what the count gained.

Frequently asked questions

Do bonus shares increase my wealth?

No. A 1:1 bonus turns 1,000 shares at ₹500 into 2,000 shares at ₹250, and the holding is ₹5,00,000 on both sides. The price per share adjusts by the factor (A+B)/B, so the value of the holding stays the same.

Is there tax when I receive bonus shares?

No. StudyCafe and Geojit both state that no tax arises at allotment. Tax arises when you sell, and the bonus lot is taxed on a cost of nil with a holding period counted from the allotment date.

What is the difference between a bonus issue and a stock split?

A bonus issue moves reserves into share capital and leaves face value unchanged. A stock split divides each share and cuts face value in the same ratio. Both raise the share count and lower the price, and neither changes the value of what you hold.

Do I have to buy before the ex-date to get the bonus?

You must hold the shares in your demat account before the ex-date. Under T+1 settlement the ex-date and record date fall on the same day, so a purchase on that day settles after the record and does not qualify. The price drops by the bonus factor on the ex-date, so the purchase before it buys no extra value.

When are bonus shares credited?

As of the Share.Market page read on 2026-10-05, within two working days after the record date, following a SEBI circular of September 2024. Earlier the credit could take up to 15 days.

Crypto investments are subject to market risk. Not financial advice.