Profit and loss will be calculated same as other shares. Difference between the over all sell value and buy value. only thing is client can get the benefit the bonus stripping to avoid the tax on other stocks trades.
Bonus stripping is explained in this link http://tradingqna.com/20328/bonus-stripping-on-bel-what-does-that-mean?show=20328#q20328
When Bonus Shares are issued to the equity shareholders, the value of the shares is not taxed as dividend distributed. However, where redeemable preference shares are issued as Bonus shares, on their redemption, the amount shall be taxed as dividend distributed.
Where Bonus Shares are issued to the Preference Shareholders, on their issue it is deemed to be dividend and liable to tax.
Expenses on issue of Bonus Shares is not allowed as deduction since capital expenditure.
Cost of acquisition of bonus shares is taken as zero hence the capital gain on selling a bonus share is equal to its selling price.
Bonus shares are shares which are allotted free to the shareholders, so one do not have to pay tax on purchase of the shares and only on sale of the bonus shares tax will be levied. The date of allotment of the bonus shares will be considered as the purchase date of the bonus shares
Capital Gain is computed separately for Original Shares and Bonus Shares, so if the period of holding is more than a year then it is classified as Long Term Capital Gains and these are exempted from paying Capital Gain tax and same implies for bonus shares, but the date of purchase will be the date of allotment, so if you hold the bonus shares for more than a year from the date of allotment then no Capital Gain tax will be levied, but you sell it before completing one year then tax will be levied @15%.
Whenever the shares are sold before one year , it will considered under short term capital gains.Now if you hold the shares for longer term, say more than one year it will fall under long term investment.
So, for shares sold which are in less than 12 months time period, is liable for 15% tax.
bonus shares are issued by the share holders , when the shares are sold before an 12 months he liable to pay tax as 15% tax , and if he hold shares more than a one year or long term zero tax under long term investment .
Bonus shares represent a situation where the individual shareholder gets free shares in addition to the ones that they actually hold. Thus a company would declare that they are issuing bonus shares for their shareholders and there would be a ratio that would be declared
The cost of bonus shares will be exactly the amount that is paid for it. This means that the cost for the shares would be zero because there is no amount that is paid for the bonus shares. These are shares which are issued free of cost and hence there is no amount that would be allocated for this purpose.
If these are held for a period of more than a year then the gains would be long term capital gains and if they are sold on the stock exchange then there would not be any tax to be paid. If the shares are sold before a period of one year then the gains would be short term capital gains and there would be a 15 per cent tax that would arise.
Bonus shares are those shares which are issued by a company free of charge to the existing shareholders of a company out of its large reserves created out of past profits.
The investor feels happy because they are getting a free share and while the price on the stock exchange corrects for this so called free impact. However there is a different impact on the tax front. For the purpose of the tax calculations the cost of a bonus shares considered as zero. The implication of this is that any amount that is earned at the time of the sale of the shares would be considered as capital gains since there is no cost involved in the purchase.
There can be a higher tax implication on this front because it could be that there are investors who have bought the shares in a company a long time ago but due to the bonus issue they find themselves in a position wherein a part of their holding suddenly is due to the bonus shares. Now if there is a need to sell these shares in the next one year then they could have a tax impact that arises due to the short term capital gains nature of the benefits that they have earned. The rate on these gains is 15 per cent.
Bonus shares save taxes.
If you sell the bonus shares before 12 months you have to pay the Short term Capital gain taxes.
If you sell it after 12 months, there is no tax on gain.
-Sherin
Bonus shares are allotted for free of cost for the share holder. For the allotted shares share holder need not to pay any kind of amount.if share holder is doing short term that means selling the bonus share before one year then there will be a charge of 15% tax. If share holder is selling after a year then there will not be any kind of Tax.
Bonus shares are issued in proportions and these shares are allotted for free to the shareholders. P&L will be calculated separately for original shares and for bonus shares allotted when its sold.
At the time of allotment, no tax would be levied and tax is only levied during sales of those shares. If the bonus shares are sold within a particular year, the complete sell value is considered under Short Term Capital gain and 15% of tax will be levied on the value.
Tax Calculation for actually bought share and bonus shares received are different. Irrespective of long term and short term bonus share acquisition price will be Zero. If you sell the share with in year it will considered as short term capital gain(15% tax) and in case if you hold more than year it will consider as capital gain where you need not to pay any tax.
Bonus shares are usually issued by company when the share price goes up significantly in value and liquidity drops. So for example, more traders are likely to trade a 1000 rs stock, then a 3000 rs stock.
Assume you had 1000 shares of INFY in your demat bought at 3000 (current price 3300 assume)
After the bonus issue u will have 1000 shares at 3000 and 2000 shares at Rs 0 (the bonus shares). Like I said the stock price will drop to around 1100.
The only assumption here is that the 3000 shares of INFY you intend to hold for more than 1 year so that you get benefit of zero long term capital gain tax in India. If you sell before 1 year, you will have to pay 15% tax on 2000 shares that you got at 0 and the selling price.
So the profit and loss will be calculated same as other shares. The only difference is between the over all sell value and buy value. only thing is client can get the benefit the bonus stripping to avoid the tax on other stocks trades.
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Bonus shares are shares which are allotted freely to the shareholders, so one do not have to pay tax on allotment of the shares and only on sale of the bonus shares tax will be levied. The date of allotment of the bonus shares will be considered as the purchase date of the bonus shares.Capital Gain is computed separately for Original Shares and Bonus Shares, so if the period of holding is more than a year then it is classified as Long Term Capital Gains and these are exempted from paying Capital Gain tax and same implies for bonus shares, but the date of purchase will be the date of allotment, so if you hold the bonus shares for more than a year from the date of allotment then no Capital Gain tax will be levied, but you sell it before completing one year then tax will be levied @15%.
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Tax p&L is calculated for bonus shares only when it is sold within a year, if it is sold after one year no tax will be levied.
Basically when you sell Bonus shares after 1 year that you have got it for held shares in your demat account it will be considered as long term capital gains, hence acquisition cost is 0 there
would be no tax levied on profit earned,In case If you sell those shares less than 1 year period which is treated as short term capital gains.It will be applicable tax on the profit.
Bonus shares will always allotted for free to the shareholders and the shareholders will get these shares in some proprtions and whose buying price will be shown as zero. No tax would be levied at the time of allotment of bonus shares. Tax would only be levied at the time of selling of bonus shares. If investor sell those bonus shares within a year, the complete sell value is considered under ‘Short term capital gain’ and 15% tax will be levied on the value. Suppose if selling after one year of Bonus received, it considered under ‘Long term capital gain’ and no tax will be levied but this has to be shown when filling ITR.
Bonus shares have made lives simpler, by alleviating the burden of tax.
Let’s see what Bonus shares are firstly:-
A Company when performing well sometimes, distributes its profits in the form of dividends or bonus shares. Consider that initially the Company has earned a profit of Rs 100 crore, and the number of outstanding shares is 1 crore. The Earnings per share would be Rs 100. It then announces bonus share in the ratio of 1:1. So the share-holders get one extra share for every one share they hold. In this case, the total number of outstanding shares become 200 and the profit becomes 200 crore. However the Earnings per share decreases to Rs 50. But with a 1:1 ratio, total Earnings per share comes to Rs 100. So it works in favor.
Say an investor brought 100 shares in Feb 2010, for Rs 200 per share. In May 2010, Bonus shares were offered in the ratio 1:1.
Now the Investor wants to sell the shares in Dec 2010, for Rs 220 per share. Since he is selling before the completion of a year, he will have to pay tax based on the short-term capital gain( as the profit went up by 20 points per share). But after the completion of a year of bonus issue, he need not worry about paying the tax as it will no longer be applicable for him.
Short-term capital gain can be calculated as, Number of sharesProfit made, i.e. in this case 200(220-200)= Rs 4000.
Bonus shares are allotted for free of cost for the share holder.
Tax will be levied at the time of selling.
If you sell the bonus shares before 12 months, then you have to pay the Short term Capital gain taxes. ( i.e 15%)
If you sell it after 12 months( From the date of allotment) , then it will be considered as long term capital gains and these are exempted from paying Capital Gain tax.
If you sold the bonus shares within a year from the date of allotment of bonus, then short term capital gain arises in your tax P&L.
Or if sold after 1 year then it will show in Long Term Capital Gain.
The only difference is the calculation of profit here: since the buy value is nil, total sell value shall be considered as gain in case of bonus shares.
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Bonus shares are issued for free to the existing share holders of the company. Only thing is client can get the benefit the bonus stripping to avoid the tax on other stocks trades.