How to Calculate Capital Gain on Bonus Shares?
Bonus shares are received without a separate purchase payment, but they still require a tax cost and holding-period analysis when sold. The acquisition date and applicable cost rules depend on when the bonus shares were issued.
Quick Answer
For bonus shares, the cost of acquisition is generally governed by the specific tax rule applicable to bonus shares, and the holding period starts from the date of allotment of the bonus shares. The original shares and bonus shares should be tracked as separate lots.
What Is the Cost of Bonus Shares?
The tax law contains a specific rule for the cost of acquisition of bonus shares. For qualifying bonus shares issued on or after the relevant statutory date, the cost can be nil; older transactions require checking the rule applicable at the time of issue.
When Does the Holding Period Start?
The holding period for bonus shares is determined from the date on which the bonus shares were allotted, rather than simply copying the acquisition date of the original shares.
Should Original and Bonus Shares Be Separate Lots?
Yes. Keeping them separately helps determine the correct acquisition date, cost and long-term/short-term classification when shares are sold.
What Records Should Be Kept?
Keep the original purchase contract note, bonus announcement or corporate-action statement, post-bonus holding statement and sale contract note.
Practical Checklist
- Record the bonus allotment date.
- Keep bonus shares separate from the original purchase lot.
- Confirm the cost rule applicable to the issue date.
- Reconcile the post-bonus quantity with the demat statement.
Related Capital Gains Questions
- What Is Capital Gain in Income Tax?
- What Is Short-Term and Long-Term Capital Gain?
- How to Calculate Capital Gain From Shares?
- What Is Cost of Acquisition for Capital Gains?
