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| Picture Explains Distinction Between Bonus Share and Share Split |
Actual Question:
How do I calculate bonus share and share split?Answer:
Dear Friend!
Let us deal with both parts
of your question separately.
Bonus Shares:
In the case of bonus shares the company issues fresh
shares by utilizing the reserves for issue of fresh shares as a gesture of
rewarding investors. Your account for the scrip with your broker will show the
recipt of shares as a purchase with zero cost along side your regular purchases.
Rural Electrification Corporation (REC) had issued a 1:1 bonus issue in August
2016 and fixed 29th September as the record date for determining the
eligible investors. The following table shows the actual bonus shares received
in our ‘Portfolio 2K15’, which incidentally is 193 based on the total holding
on 9th September 2016.
|
Purchase
|
|||
|
Date
|
Qty
|
Rate
|
Cumulative
Quantity
|
|
13/02/17
|
30
|
146.79
|
491
|
|
05/01/17
|
40
|
126.7
|
461
|
|
05/12/16
|
25
|
132.07
|
421
|
|
06/10/16
|
193
|
0
|
396
|
|
05/10/16
|
10
|
133.92
|
203
|
|
09/09/16
|
6
|
248.22
|
193
|
|
04/08/16
|
9
|
216.78
|
187
|
|
15/07/16
|
8
|
203.92
|
178
|
|
11/07/16
|
8
|
194.02
|
170
|
|
14/06/16
|
7
|
165.65
|
162
|
|
24/05/16
|
3
|
159.38
|
155
|
|
13/05/16
|
3
|
169.78
|
152
|
|
11/05/16
|
5
|
169.31
|
149
|
|
20/04/16
|
3
|
164.58
|
144
|
|
14/03/16
|
4
|
174.09
|
141
|
|
10/03/16
|
15
|
168.85
|
137
|
|
04/03/16
|
9
|
168.52
|
122
|
|
24/02/16
|
4
|
160.21
|
113
|
|
12/02/16
|
4
|
171.01
|
109
|
|
03/02/16
|
5
|
187.31
|
105
|
|
18/01/16
|
15
|
196.6
|
100
|
|
07/01/16
|
4
|
222.11
|
85
|
|
08/12/15
|
20
|
223.9
|
81
|
|
14/10/15
|
17
|
264.77
|
61
|
|
27/08/15
|
4
|
255.88
|
44
|
|
04/08/15
|
10
|
274.34
|
40
|
|
22/07/15
|
10
|
284.39
|
30
|
|
12/06/15
|
4
|
277.99
|
20
|
|
07/04/15
|
6
|
327.68
|
16
|
|
06/04/15
|
10
|
334.71
|
10
|
|
|
491
|
|
|
As far as tax treatment is concerned, even though I
am not a tax expert, the bonus shares are deemed to be issued on 6th
October 2016 the day they are credited to your account. The cost of acquisition
is zero. In case we sell the shares before 5th October 2017 the
entire sale proceeds relating to these 193 bonus shares will be treated as
short-term capital gains. If sold after 5th October 2017 the entire
sale proceeds are long-term capital gains for which there is no tax in the
present tax scheme.
Share Split:
There
is no real example of share-split in our portfolio. Therefore let us assume
that instead of a bonus shares REC split the shares with the face value of
Rs.10 into two with the face value of Rs.5 each. In such a case the table will
look as follows:
|
Date
|
Purchase
|
Share-Split
|
|||
|
Qty
|
Rate
|
Split Quantity
|
Split Rate
|
||
|
13/02/17
|
30
|
146.79
|
30
|
73.40
|
|
|
05/01/17
|
40
|
126.7
|
40
|
63.35
|
|
|
05/12/16
|
25
|
132.07
|
25
|
66.04
|
|
|
05/10/16
|
10
|
133.92
|
10
|
66.96
|
|
|
09/09/16
|
6
|
248.22
|
12
|
124.11
|
|
|
04/08/16
|
9
|
216.78
|
18
|
108.39
|
|
|
15/07/16
|
8
|
203.92
|
16
|
101.96
|
|
|
11/07/16
|
8
|
194.02
|
16
|
97.01
|
|
|
14/06/16
|
7
|
165.65
|
14
|
82.83
|
|
|
24/05/16
|
3
|
159.38
|
6
|
79.69
|
|
|
13/05/16
|
3
|
169.78
|
6
|
84.89
|
|
|
11/05/16
|
5
|
169.31
|
10
|
84.66
|
|
|
20/04/16
|
3
|
164.58
|
6
|
82.29
|
|
|
14/03/16
|
4
|
174.09
|
8
|
87.05
|
|
|
10/03/16
|
15
|
168.85
|
30
|
84.43
|
|
|
04/03/16
|
9
|
168.52
|
18
|
84.26
|
|
|
24/02/16
|
4
|
160.21
|
8
|
80.11
|
|
|
12/02/16
|
4
|
171.01
|
8
|
85.51
|
|
|
03/02/16
|
5
|
187.31
|
10
|
93.66
|
|
|
18/01/16
|
15
|
196.6
|
30
|
98.30
|
|
|
07/01/16
|
4
|
222.11
|
8
|
111.06
|
|
|
08/12/15
|
20
|
223.9
|
40
|
111.95
|
|
|
14/10/15
|
17
|
264.77
|
34
|
132.39
|
|
|
27/08/15
|
4
|
255.88
|
8
|
127.94
|
|
|
04/08/15
|
10
|
274.34
|
20
|
137.17
|
|
|
22/07/15
|
10
|
284.39
|
20
|
142.20
|
|
|
12/06/15
|
4
|
277.99
|
8
|
139.00
|
|
|
07/04/15
|
6
|
327.68
|
12
|
163.84
|
|
|
06/04/15
|
10
|
334.71
|
20
|
167.36
|
|
|
|
298
|
|
491
|
|
|
In
the case of share-split the number is doubled and the rate is simply halved.
The date of acquisition is the same as the date of original purchase. The logic
behind it is that the same share has been split into two – no new share is
created – therefore the original date of acquisition remains intact.
The
tax treatment is the cost of acquisition (the halved cost in this example) will
be deducted from the selling price to arrive at the capital gains. The long or
short term is determined with respect to the original date of acquisition.
Thank
you,
With
Best Regards
Anand