Searches for bonus shares (बोनस शेयर) jumped on Google this week. A bonus issue feels like free money. It is not taxed when the shares reach your demat account, but the way the tax works when you sell surprises many investors.
What happens to the share price
In a 1:1 bonus, you get one new share for every share you hold, and the price roughly halves on the ex-bonus date. Your total investment value does not change on that day. You simply hold twice as many shares at about half the price.
How bonus shares are taxed when you sell
| Shares sold | Cost for tax | Holding period starts | Tax on gain (listed shares) |
|---|---|---|---|
| Original shares | What you paid | Your original purchase date | Held 12 months or less: short-term, 20%. Held more than 12 months: long-term, 12.5% on gains above ₹1.25 lakh in the year. |
| Bonus shares | Zero | The bonus allotment date |
A worked example
Riya bought 100 shares at ₹1,000 each in January 2025. In November 2026 the company issues a 1:1 bonus, so she now has 200 shares and the price adjusts to about ₹600.
- If she sells her 100 original shares at ₹600, she has a long-term capital loss of ₹40,000 (₹60,000 received minus ₹1,00,000 cost), because she held them for more than 12 months.
- If she sells her 100 bonus shares at ₹600 in December 2026, the whole ₹60,000 is a short-term capital gain, because their cost is zero and she held them for less than 12 months. That gain is taxed at 20%.
The total value of her holding has not changed, yet one choice creates a loss and the other creates a taxable gain. Which shares you sell, and when, matters.
Practical points
- Check your broker's statement. Some capital gains reports apply first-in-first-out across original and bonus shares. Make sure the cost and dates shown match the rules above before you file.
- Waiting 12 months from allotment turns the bonus shares into long-term holdings, taxed at 12.5% and only above ₹1.25 lakh of total long-term gains in the year.
- Dividends on bonus shares are taxed at your slab rate like any other dividend. TDS applies if a company pays you more than ₹10,000 of dividend in a year.
- If you also sell units of a mutual fund that issued bonus units, special loss rules can apply. Speak to us before booking a loss in that case.
Frequently asked questions
Are bonus shares taxable when they are credited?
No. No tax is payable when bonus shares are credited to your demat account. Tax arises only when you sell them.
What is the cost of acquisition of bonus shares?
The cost of acquisition of bonus shares is taken as zero for income-tax purposes, so the full sale price is the capital gain.
When does the holding period of bonus shares start?
The holding period of bonus shares starts from the date of allotment of the bonus shares, not from the date you bought the original shares.
What is the tax rate on selling bonus shares?
For listed shares, a sale within 12 months of allotment is a short-term gain taxed at 20%. A sale after 12 months is a long-term gain taxed at 12.5% on the part of total long-term gains above ₹1.25 lakh in the year.
How Vitt-Marg helps
We handle income-tax returns, capital gains computation, tax planning, GST and ROC compliance for individuals, businesses and companies across Noida, Ghaziabad and Delhi NCR. Send us your broker statements or documents and we will tell you exactly what you owe and how to file it correctly.
General information, current as of 6 November 2026, not advice for a specific case. Due dates and fees change with MCA and CBDT notifications. Check with us before acting on it.