11.3 – Bonus Issue
A bonus issue is a stock dividend, allotted by the company to reward the shareholders. The bonus shares are issued out of the reserves of the company. … When the bonus shares are issued, the number of shares the shareholder holds will increase, but an investment’s overall value will remain the same.
A Capitalisation Issue is an issue of new shares to existing shareholders in proportion to their existing shareholding. Shareholders do not pay for the new shares that they are receiving.
1) Bonus shares can be issued by a company only if the Articles of Association of the company authorizes a bonus issue. Where there is no provision in this regard in the articles, they must be amended by passing special resolution act at the general meeting of the company.
|Indo US Bio-Tec||1:5||29-11-2021|
Companies issue bonus shares to encourage retail participation and increase their equity base. When price per share of a company is high, it becomes difficult for new investors to buy shares of that particular company. Increase in the number of shares reduces the price per share.
Section 56 (2) (vii) Income Tax Act does not apply to the issue of Bonus shares because there is a mere capitalization of profits by the issuing company and there is neither an increase or decrease in the wealth of the shareholder as his percentage holding remains constant.
The issue of bonus shares in payment of dividends is called capitalization of un-distributed profit. The following accounting entry is made for the issuance of bonus shares: Dividends Payable ———————————- Dr. Share Capital ——————————————Cr.
Is a Capitalisation issue a dividend?
The receipt of capitalization shares will, however, invariably not constitute a dividend received as defined in the Income Tax Act and would therefore not rank as a dividend received in the calculation of the net amount (dividends declared less dividends received) on which the shareholder’s own liability for STC is …
Fully paid up bonus shares may be issued only out of free reserves, securities premium account or capital redemption reserve account. (Section 63(1) The bonus shares shall not be issued in lieu of dividend.
Q. 5 Can company issue Bonus Shares in different ratio to its existing shareholders? Ans. No, Company cannot issue bonus shares in different ratio, It shall issue bonus shares to the existing shareholders in proportion to their existing holdings.
If you are eligible for Bonus shares, for it to be credited to your DEMAT account, generally takes 15 days from the record date, but this depends on the RTA (Registrar & Share Transfer Agents). You will receive an SMS from CDSL when your bonus shares are credited to your DEMAT.
Wipro Ltd. has given 5 bonuses since June 25, 2004. The last Bonus that Wipro Ltd. anoununced was in the ratio 1:3 with ex-date of March 6, 2019.
Corporate actions: Bonus history for Wipro Ltd.
|Ex-Date||Bonus Ratio||Record Date|
|March 6, 2019||1:3||March 7, 2019|
|June 13, 2017||1:1||June 14, 2017|
|June 15, 2010||2:3||June 16, 2010|
|Aug. 22, 2005||1:1||Aug. 23, 2005|
Corporate actions: Bonus history for Tata Consultancy Services Ltd. Tata Consultancy Services Ltd. has given 3 bonuses since July 28, 2006. The last Bonus that Tata Consultancy Services Ltd. anoununced was in the ratio 1:1 with ex-date of May 31, 2018.
What is bonus announcement date and record date?
Bonus shares are free shares issued by the company to its existing share holders. … Bonus shares are usually announced by the company with a record date, the date which is considered for the bonus shares. All the investors holding the shares on the record date are eligible for bonus shares.