How to Save Taxes with Bonus Shares?
Consider you are buying 500 Shares of a Company at Rs. 100.
Later the company issues bonus of 500 shares. Now you have 1000 Shares and share price gets adjusted by half to Rs. 50.
Buy price of first 500 shares is Rs. 100 and the buy price of bonus 500 shares is Rs. 0.
Now when you sell your first 500 shares at Rs. 50.
Profits= No of shares x (Sell price-Buy price)
Profits= 500 x (50-100) = -25,000.
You can always book these type of losses and save on short term gain taxes and also carry forward these losses. You should ensure that the bonus shares are held for long term as they carry buy price of Rs. 0.
Consider even if the share has rallied 100% from buy price of Rs. 100 to Rs. 200.
After the issue of Bonus shares, the adjusted price of the shares become Rs. 100.
Profits= 500x (100-100)= 0.
Selling the first 500 shares will attract no income tax even if you have made a profit of 100% on these shares. Just that you need to hold the bonus shares for long term.
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