Knowledge Base

Bonus shares are not taxed when they are credited to your account. Since you’re not paying anything to receive them, there is no income tax at the time of allotment.

However, taxes apply when you sell them.

How capital gains tax works on bonus shares

The cost of acquisition for bonus shares is considered zero and since you received them for free. This means when you sell them, the entire sale proceeds are treated as capital gains.

Whether it’s short-term or long-term depends on how long you hold them before selling. The applicable tax rate is based on the capital gains tax rules in effect at the time of sale.

Holding period calculation

For bonus shares, the holding period starts from the date the bonus shares are credited to your DEMAT — not from when you bought the original shares.