Bonus Shares Timeline Calculator
Introduction
You must have heard about bonus shares. They’re like a little gift from companies to their shareholders.
But the process of getting and trading these shares used to take time (previously).
But on October 2024, SEBI rolled out new rules to make bonus shares process faster and smoother.
I often get queries from my readers related to bonus shares. Hence I thought to write a blog post answering these queries which will be helpful for other readers as well.
So, let’s try to understand things like how soon you can sell those bonus shares or what the holding period is.
What Are Bonus Shares, Anyway?
Imagine you own 100 shares of a company, and they announce a 1:1 bonus issue.
That means you get 100 extra shares for free.
These bonus shares are given based on how many shares you already own.
Earlier (before October 2024), the waiting time to trade them was about 5 to 7 days. SEBI’s new rules, effective from October 1, 2024, have substantially reduced the waiting time.
How Many Days to Credit Bonus Shares?
In the past, bonus shares could take anywhere from 2 to 7 working days to show up in your demat account.
That delay was not acceptable to our regulator. Hence, SEBI decided to streamline things.
Bonus shares will be credited to your account by the next working day after the record date. That’s called the “deemed date of allotment” (T+1).
The record date is the specific day when a company identifies its shareholders who are eligible to receive bonus shares.
For example, if the record date is July 20, 2025, your bonus shares will be credited by July 21, 2025.
When Can You Start Trading Bonus Shares?
Under the new rules, you can trade your bonus shares on the second working day after the record date (T+2).
So, if the record date is July 20, 2025, you can sell or trade those shares on July 22, 2025.
Compare that to the old system, where you might have waited a week.
This T+2 trading rule is a win for investors. It means you can act faster if you want to sell and exit your holdings.
What’s the Holding Period for Bonus Shares?
Now, this is a question many of you are asking.
The holding period for bonus shares depends on how long you’ve held the original shares.
- For tax purposes, the holding period of bonus shares starts from the date they’re credited to your demat account. If you sell them within 12 months, any profit is treated as short-term capital gain, taxed at 15%. Hold them longer, and it’s long-term capital gain, which is tax-free up to Rs.1 lakh per year. The new rules don’t change this tax structure, but they do let you decide faster whether to hold or sell.
If you are not worried about tax liability, you can sell the shares the next day it gets credited to your demat account (T+2).
Can You Sell Shares After the Record Date?
Yes, you can sell your original shares right after the record date and still get the bonus shares.
The record date is when the company checks its shareholder list to decide who qualifies for the bonus.
Once that date passes, your eligibility is locked in. Selling your original shares afterward won’t affect your bonus entitlement.
But here’s a tip. Check the market. Sometimes, share prices drop after a bonus issue due to the increased number of shares. So if you want to time the market wisely, do not try to sell your shares after the record date.
Why Did SEBI Make These Changes?
Why did SEBI decided to shake things up.
The old system had too many delays. Bonus shares were credited to a temporary ISIN (a unique code for securities), and then moved to the permanent ISIN.
That extra step was a hassle for companies and depositories.
Now, SEBI says bonus shares can go straight to the permanent ISIN. This cuts down paperwork and speeds up the process.
Plus, it boosts market efficiency.
How Does This Affect You as an Investor?
Let’s paint a picture.
Say you own shares in a hypothetical company called ABC Ltd.
They announce a bonus issue with a record date of July 20, 2024.
Under the new rules, your bonus shares will be credited by July 21, 2024. After that, you can also trade them on July 22, 2024.
If the stock price jumps, you can cash in quickly. Or, if you’re a long-term investor, you can hold onto those extra shares for future gains.
Either way, the faster timeline gives you more control.
What Companies need to do from their part to speed up the bonus shares issuance to shareholders?
Companies must apply for stock exchange approval within five working days of their board meeting (in which the decision of Bonus Shares issue was approved).
After setting the record date, they need to send documents to depositories by 12 noon the next working day.
If they slip up, SEBI has strict penalties in place. This keeps everyone on their toes, ensuring you get your shares on time.
Conclusion
What are the key benefits of the new rule?
- Faster Trading: You can trade bonus shares in just two days after the record date.
- Less Hassle: Direct crediting to the permanent ISIN means less paperwork.
- Better Liquidity: Quicker access to shares means you can react to market changes sooner.
I’ll also like to add here that while these changes are great, don’t rush to sell your bonus shares without a plan.
Bonus issues often lead to immediate price adjustments in the market.
Sometimes, the stock price drops to reflect the increased number of shares.
Keep an eye on the company’s fundamentals and market trends. Ask yourself this – is selling now the best move, or should I hold for bigger gains?
SEBI’s new rule has made bonus shares easier to get and trade.
Next time a company announces a bonus issue, you’ll know exactly when those shares will be in your demat account.
Have a happy investing.
