What are Bonus
Bonus shares are additional shares issued to existing shareholders free
of cost. These are basically acccumulated profits of the company not
distributed as dividends instead distributed as free of cost additional
Number of shares held by the exisiting shareholders increases in a
ratio to his/her original shareholding.
example Mr. X had 500 shares of a company. The company
shares in the ratio of 5:1. Mr. X will get 100 shares of the company as
bonus shares without any extra cost. Total holding of Mr. X in the
company after bonus issue will increase to 600 shares.
Taxability of Gain on sale of Bonus Shares