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What are Bonus Shares?

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 shares.

Number of shares held by the exisiting shareholders increases in a ratio to his/her original shareholding.

For example  Mr. X had 500 shares of a company. The company issued bonus 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

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