Bonus Shares

Bonus shares are extra shares a company gives to existing shareholders for free, based on how many they already own. It is like a free stock dividend from company's profits.
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Bonus Shares
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3 mins read
19-March-2026

Bonus shares are additional shares granted to existing shareholders at no extra cost, based on the quantity of shares they currently hold. These shares represent the company's retained earnings, which are allocated as free shares instead of being issued as dividends.

 

List of upcoming bonus shares in 2026

Here are the companies that have recently announced the issuance of the bonus share list 2026:

CompanyBonus RatioAnnouncement DateRecord DateEx-Bonus Date
R M Drip & Sprinklers Systems Ltd5:712th Mar, 202610th Apr, 202610th Apr, 2026
Avax Apparels and Ornaments Ltd3:130th Mar, 20267th Apr, 20267th Apr, 2026
B2B Software Technologies Ltd1:227th Mar, 20262nd Apr, 20262nd Apr, 2026
R&B Denims Ltd1:224th Mar, 20263rd Apr, 20262nd Apr, 2026
IRB Infrastructure Developers Ltd1:124th Mar, 20261st Apr, 202630th Mar, 2026
Kilitch Drugs (India) Ltd1:118th Mar, 202624th Mar, 202624th Mar, 2026
Times Green Energy India Ltd1:119th Mar, 202624th Mar, 202624th Mar, 2026
Metropolis Healthcare Ltd3:111th Mar, 202620th Mar, 202620th Mar, 2026


What are bonus shares?

Bonus shares are additional shares granted by a company to its existing shareholders at no cost, proportionate to their current holdings. Rather than paying out surplus profits as dividends, the company reinvests them and issues free shares. This approach benefits shareholders by increasing their holdings while allowing the company to retain capital for future growth.

The issuance of bonus shares requires approval from the company’s Board of Directors. Once approved, the bonus shares are credited directly to the shareholders’ accounts.

These shares are allocated in a specified ratio, such as 3:1, meaning shareholders receive 3 bonus shares for every 1 share they already hold. For instance, if you own 100 shares, you will receive an additional 300 bonus shares.

 

Types of bonus shares

Bonus shares can be classified into two main types: fully paid bonus shares and partially paid bonus shares.

1. Fully paid bonus share

Fully paid bonus shares are those shares for which the shareholder has already paid the entire amount due at the time of issuance. When a company distributes fully paid bonus shares, it does not require any further payment from its shareholders. These bonus shares are allotted to the existing shareholders in proportion to their existing holdings, without any additional financial burden on their part.

2. Partially paid bonus share

Partially paid bonus shares, on the other hand, are shares for which the shareholder has paid only a portion of the total amount due. In this scenario, the company issues bonus shares to its shareholders, but they are still required to make further payments to fully own these shares. The additional payment needed to fully pay for these bonus shares is usually communicated by the company along with the issuance.

Both types of bonus shares aim to enhance shareholder value and confidence by increasing the number of shares held by investors without diluting their ownership stake in the company. However, it is essential for investors need to understand the terms and conditions associated with bonus share issues, particularly in the case of partially paid bonus shares, to avoid any misunderstandings or financial implications.

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How to calculate the bonus share percentage?

To understand a bonus issue, start by identifying the bonus ratio, which indicates how many additional shares you will receive for each existing share. For example, a 1:1 bonus ratio means that you will get one new share for every share you currently hold. Once the bonus ratio is clear, calculate the total number of shares you will own post-issue by multiplying your existing shares by the bonus ratio and then adding the result to your original holdings. For instance, if you own 100 shares and the company announces a 1:1 bonus, you will receive an additional 100 shares, making your new total 200. This process helps shareholders accurately understand the change in their shareholding after the bonus distribution.

 

Features of bonus shares

Bonus shares convert company reserves into share capital, avoiding cash payouts. They do not impact cash flow or net assets, only increasing share count while preserving liquidity and rewarding shareholders:

  • Enhances the company's goodwill among shareholders and potential investors.
  • The shareholding pattern remains unchanged as shares are distributed on a pro-rata basis.
  • Share prices decrease significantly after a bonus issue, making them more accessible to retail investors.
  • The increase in the number of outstanding shares improves stock liquidity.
  • Bonus shares can only be issued after a minimum period of 12 months from the last issue.
  • A maximum of two bonus issues is allowed within a five-year period.

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Here are a few reasons why companies issue bonus shares:

1. Capitalisation of reserves

Bonus shares allow companies to convert accumulated earnings from reserve accounts into share capital, distributed among existing shareholders relative to their current holdings.

2. Increase in share liquidity

Issuing bonus shares enhances market liquidity by increasing the number of shares available, making it easier for smaller investors to trade.

3. Affirmation of confidence

This move can signal the management's belief in the company's long-term profitability and robust health.

4. Adjustment of share price

The issuance of bonus shares typically lowers the share price, making the stock more accessible to a wider range of investors without affecting the overall market capitalisation.

5. Earnings Per Share (EPS) adjustment

While EPS may initially decrease, the reduced share price can attract more investors, potentially increasing future earnings.

6. Encouragement of retail participation

A lower share price post-issuance can encourage more retail investors to buy shares, diversifying the investor base and stabilising the stock price.

7. Psychological impact

Issuing bonus shares can create a positive perception of the stock and reinforce shareholder loyalty.

Overall, issuing bonus shares utilises internal resources efficiently, optimises stock market performance, and strengthens shareholder relations while promoting broader investor support.

Eligibility for allotment of bonus shares

Shareholders listed on the company’s record date are eligible to receive bonus shares proportionately and automatically.

  • Ex-Date:
    The first trading day on which the stock no longer carries the right to receive bonus shares. Buying on or after this date makes you ineligible for the bonus.
  • Record Date:
    The date on which the company checks its records to identify eligible shareholders. Only those holding shares as of this date will receive the bonus shares.

Let us look at an example to understand how eligibility for a bonus issue of shares works.

Suppose a company announces a bonus issue on April 5th and sets the record date as April 26th. This means the ex-date is April 25th. So, you must purchase shares in the company by April 25th if you want the advantage of its bonus shares. This way, you will appear as a registered shareholder in the company’s records in T+1 days, i.e. by April 26th, which is the record date.

Why do companies issue bonus shares?

Bonus shares attract retail investors, reflect financial strength, and serve as an alternative to dividends, rewarding loyal shareholders affordably.

  • Lowering the current price per share.
  • Promoting liquidity for its shares in the secondary market.
  • Improving retail investor participation.
  • An alternative to dividend payments to shareholders.
  • Boosting the company’s reputation in the market.

Advantages of bonus shares

Bonus shares increase shareholder value, enhance liquidity, reduce share price per unit, and encourage long-term investment.

For the Company:

  • Bonus shares reduce the need to distribute cash dividends, preserving liquidity.
  • Issuing bonus shares builds shareholder trust and confidence.
  • An increase in outstanding shares may enhance the company’s market presence and value.
  • Bonus shares often reflect a profitable financial year and strong fundamentals.

For Investors:

  • Investors receiving bonus shares are not taxed immediately, offering a tax advantage.
  • Bonus shares are ideal for long-term investors seeking capital appreciation.
  • Shareholders increase their holding without spending extra money, gaining more equity in the company.

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Disadvantages of bonus shares

Bonus shares carry opportunity costs, reduce future dividend potential, offer no immediate gain, and may concern investors preferring regular cash returns.

1. From an investor's point of view

  • Dilution of Earnings Per Share (EPS): Receipt of bonus shares increases the number of shares held but does not change the total profits, resulting in a reduced EPS. This lower EPS can negatively affect the valuation perceived by potential investors.

2. From a company’s point of view

  • No cash inflow: Issuing bonus shares does not generate cash as they are funded from the company's reserves. This method redistributes retained earnings into share capital without adding new funds, limiting the company's capacity to invest in new projects or reduce debt.
  • Reduced flexibility for future capital raises: With more shares in circulation, future capital raising efforts may require issuing more shares to raise equivalent funds, potentially diluting the stock further and possibly lowering the price.
  • Potential misinterpretation of financial health: Regularly issuing bonus shares rather than dividends might suggest to the market that the company lacks sufficient cash for dividend payouts, which could lead to concerns about its liquidity and cash flow.
  • Increasing costs over time: The administrative and regulatory costs associated with issuing bonus shares can accumulate and managing a complex share structure can be administratively burdensome.

These points highlight that while bonus shares can strategically redistribute a company's retained earnings and reward investors, they also introduce challenges that could affect investor perceptions and the company’s financial strategy.

Conclusion

You can keep up with the news to track all upcoming bonus issues and purchase shares of promising companies before the ex-date. This will help you diversify your portfolio and multiply your investments in a cost-effective manner.

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Frequently asked questions

What is bonus shares in simple terms?

Bonus shares are free additional shares issued to existing shareholders from a company’s reserves. They increase the number of shares held without affecting the total investment value, serving as a goodwill gesture.

Can I sell bonus shares?

Yes, bonus shares can be sold after they are credited to your demat account—usually around 15 days post ex-date. Selling before credit may lead to auction risk due to non-availability.

Does share price fall after a bonus issue?

Yes, the share price typically drops based on the bonus ratio. In a 1:1 issue, the price usually halves. For instance, a Rs. 100 share may trade at Rs. 50 post bonus, maintaining investment value.

Is it good to buy bonus shares?

Bonus shares themselves do not directly impact your investment value. The company's total worth stays the same, spread across more shares. The share price usually adjusts proportionally after the bonus issuance. So, if you were considering buying shares, it might be a good time to wait until the post-bonus price settles.

Does the issue of bonus shares enhance the company’s value?

No, issuing bonus shares does not increase the company’s market capitalisation. The share price adjusts in proportion to the bonus ratio, keeping the company’s total value unchanged.

Does the share price fall after a bonus issue?

Yes, the share price typically drops based on the bonus ratio. In a 1:1 issue, the price usually halves. For instance, a ₹100 share may trade at ₹50 post bonus, maintaining investment value.

What does a 1:2 bonus share mean?

A 1:2 bonus issue means shareholders receive one extra share for every two shares they hold, free of cost. It increases the share count while retaining overall value.

Who is eligible for a bonus share issue?

Investors holding shares before the ex-date and record date qualify. Under India’s T+2 settlement system, the ex-date is set two business days before the record date by the company.

Do I Need to Pay Tax on My Bonus Shares?

Bonus shares themselves are not taxed at the time of allotment. When a company issues bonus shares, you receive them free of cost, so no immediate tax liability arises under Indian tax laws.

However, taxation applies when you sell them. The cost of acquisition is treated as ₹0, and the entire sale value becomes capital gains. If sold within one year, gains are taxed as short-term capital gains (STCG) at 15%. If held for over one year, gains are taxed as long-term capital gains (LTCG) at 10% above ₹1 lakh (without indexation).

In short, no tax on receipt, but tax on sale, depending on your holding period and gains.

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