Bonus Shares in Demat: When and How They're Credited

Bonus shares are free additional shares given to existing shareholders based on their current holdings. Issued from accumulated profits, they reward shareholders without using cash. Knowing when bonus shares appear in your demat account helps investors stay informed about corporate actions.

Bonus shares are free additional shares issued by a company to its existing shareholders, generally in a specific ratio (e.g., 1:1, 2:1).

A 1:1 bonus means you receive one additional share for every share held.

Bonus shares increase the total number of shares held by the investor without changing the overall value of their investment.

Companies issue bonus shares for several reasons:

• To capitalise reserves and convert profits into share capital
  

• To reward shareholders without affecting liquidity
  

• To improve share affordability by reducing the stock price through increased supply
  

• To enhance investor confidence and broaden the investor base

You are eligible for bonus shares if you hold shares in your demat account on the record date declared by the company.

Key Terms to Know:

• Record Date: The cut-off date to determine eligible shareholders
  

• Ex-Bonus Date: The date from which the stock trades without the bonus benefit
  

• Bonus Ratio: The number of bonus shares issued for each existing share

Only shareholders who own the stock before the ex-bonus date are eligible for the bonus issue.

The process of crediting bonus shares to your demat account involves several key steps:

Step-by-Step Flow:

Step 1: Board Approval

Company announces bonus issue and ratio

Step 2: Record Date Announcement

Company sets a record date to determine eligible shareholders

Step 3: Ex-Bonus Date

Stock price adjusts to reflect the bonus shares

Step 4: Allotment

Bonus shares are allotted to shareholders on record

Step 5: Credit in Demat Account

If you're asking when bonus shares will be credited to your demat account, they usually appear within 15 working days from the record date.

The bonus shares are reflected under the ISIN (International Securities Identification Number) of the original stock in your demat account.

• Increased Ownership – More shares are added to your account without extra cost.
  

• No Additional Investment – You gain extra shares without spending money.
  

• Improved Liquidity – Lower share price after the bonus makes trading easier.
  

• Long-Term Growth – Larger holdings can yield higher future gains if the company grows.
  

• Tax Advantage – No tax is charged when you receive bonus shares; applicable only on sale.

While the exact credit date may vary by company, the general timeline is as follows:

You can check bonus share credits using these methods:

Always verify that the credited quantity matches the declared bonus ratio.

Bonus shares increase your share count, while the stock price adjusts to reflect the higher number of shares:

Example:

If you own 100 shares of a company that issues a 1:1 bonus, you will receive 100 additional shares, making your total holdings 200. However, the stock price will adjust accordingly to maintain the same total investment value.

Price Adjustment Formula (approximate):

Adjusted Price = Current Price ÷ (1 + Bonus Ratio)

If stock trades at ₹500 and issues 1:1 bonus:
Adjusted Price = ₹500 ÷ (1 + 1) = ₹250

Bonus shares have specific tax rules, such as:

• No tax is levied at the time of receiving bonus shares
  

• If bonus shares are sold, capital gains tax applies
  

• Purchase cost of bonus shares is considered ₹0, which affects gain calculation
  

Capital Gains Calculation Example:

If bonus shares are sold for ₹100 per share:
Capital Gain = Selling Price – Cost of Acquisition (₹0) = ₹100 per share

Ensure the holding period is tracked for determining short-term or long-term capital gains.

Bonus shares increase your shareholding without any cash cost. Though not an immediate cash benefit, they boost share quantity, potentially raising future dividends and value. Keep track of the record date and verify your demat account after allotment to confirm credit of bonus shares.

This content is for informational purposes only and the same should not be construed as investment advice. Bajaj Finserv Direct Limited shall not be liable or responsible for any investment decision that you may take based on this content.