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Taxation of Bonus shares and Stock split
Taxation of Bonus shares and Stock split
There are 2 types of Capital Gain taxes , 1) LTCG is Long Term Capital Gain 2) STCG is Short Term Capital Gain
LTCG is listed securities like shares , debentures ,bonds, etc in a recognized stock exchange sold holding more than
12 months is nil on the profits upto Rs 1 lakh and beyond Rs 1 lakh profit its 10% without indexation benefit.
STCG is same listed securities in a recognized stock exchange sold holding less than 12 months is 15% on the profit.
Holding period may vary for unlisted shares s 24 months and unlisted securities other than shares s 36 months.
BONUS SHARES are shares allotted for free to the shareholders and the shareholders dont pay anything to buy these
shares and your capital increases. For example if a person buys 100 shares of company on 1/8/2019 t Rs 100 each and on 5/2/2020
the company allots bonus shares in the ratio 1:1 so the total shares 100+100 is 200. On 2/9/2020 he sells all 200 shares at Rs 120 each.
LTCG on sale of original 100 shares which was bought more than 12 months (1/8/2019).
Cost price 100*100=Rs 10,000
Selling Price 100*120=Rs 12,000
Capital Gains =Rs 2,000
LTCG 10% = Rs 200
STCG on sale of 100 bonus shares which was allotted less than 12 months (5/2/2020)
Cost Price 100*0= Rs 0
Selling Price 100*120= Rs 12,000
Capital Gains = Rs 12,000
STCG 15% = Rs 1,800
So total tax LTCG is Rs 200 + STCG is Rs 1,800 = Rs 2,000
Here in Bonus shares company investment made Rs 10,000 and sold for Rs 24,000 , profit before tax is Rs 14,000, taxes paid Rs 2,000.
STOCK SPLIT is the same stock split into more shares where your capital remains same. For example if a person buys 100 shares of
a company on 1/8/2019 at Rs 100 each. On 5/2/2020 the company announces shares split in the ratio 1:1 , so total shares will be 100+100=200
but the stock price on the day was Rs 110 each will be divided by 2 where the stock will become Rs 55 each. On 2/9/2020 he sells all
200 shares at Rs 60 each.
LTCG on sale of 200 shares
Cost price 100*100 = Rs 10,000
Selling price 200*60 = Rs 12,000
Capital Gains =Rs 2,000
LTCG 10% = Rs 200.
Here in Stock split company investment Rs 10,000 and sold for Rs12,000, profits Rs 2,000 and taxes paid Rs 200
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