What is the stock bonus?
Definition: Bonus shares are additional shares given to the current shareholders without any additional cost, based upon the number of shares that a shareholder owns. These are company's accumulated earnings which are not given out in the form of dividends, but are converted into free shares.
Is it good to buy bonus shares?
Bonus shares give positive sign to the market that the company is committed towards long term growth story. Bonus shares increase the outstanding shares which in turn enhances the liquidity of the stock. The perception of the company's size increases with the increase in the issued share capital.
What is the benefit of bonus shares to shareholders?
Bonus shares help a company to enhance its value positions in the equity market. It also helps them to gain the trust of their existing shareholders, which eventually attracts more small investors to invest. Additionally, issuing bonus shares relieves them from paying cash dividends to their shareholders.
Can I sell bonus shares?
Shareholders may sell the bonus shares and meet their liquidity needs. Bonus shares may also be issued to restructure company reserves. Issuing bonus shares does not involve cash flow. It increases the company's share capital but not its net assets.
Are bonus shares free?
Bonus shares are accumulated profits that a company distributes to the current shareholders as free shares. There are no additional costs involved, and the shares are given the basis of the current holding of shareholders.
What are the disadvantages of bonus shares?
Disadvantages of Bonus Shares 1) The company do not receive any cash while issuing bonus shares. As a result, the ability to raise money by following an offering is minimized. 2) When a company keep on issuing bonus shares instead of paying dividends, the cost of the bonus issued keeps adding up over the years.
How do I claim bonus shares?
In India, the delivery of shares into a Demat account takes place after 2 days from the trading date. All existing shareholders before the ex-date and record date are eligible to receive bonus shares issued by a company. However, to qualify to receive bonus shares, the company stocks must be bought before the ex-date.
Are bonus shares taxable?
The investor gets the following benefits from bonus stripping: The STCL on the sale of original shares can be set off against other capital gains income, both STCG, and LTCG, and thus leads to a reduction in tax liability. The LTCG on the sale of bonus shares is exempt up to INR 1 lac and taxable at a rate of 10%