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CA Intermediate · Taxation · Capital Gains

Rohan held 100 listed equity shares of a company, bought in 2023 at Rs 500 each. On 10 January 2026 the company issued 1:1 bonus shares to him. On 20 March 2026 he sold all 100 bonus shares on the stock exchange at Rs 600 each, paying STT. Ignoring expenses, what is the capital gain on the bonus shares?

It is a short-term capital gain of Rs 60,000. Bonus shares have nil cost of acquisition and their holding period starts on the allotment date, 10 January 2026. Sale about two months later is short-term, and the full sale value of Rs 60,000 is the gain.

  1. AShort-term capital gain of Rs 60,000Correct
  2. BLong-term capital gain of Rs 60,000
  3. CShort-term capital gain of Rs 10,000
  4. DLong-term capital gain of Rs 10,000

Explanation

The cost of acquisition of bonus shares allotted without payment is nil, and their holding period runs from the date of allotment. Sale on 20 March 2026 is within 12 months of 10 January 2026, so the gain is short-term. Gain = 100 × 600 - nil = Rs 60,000. Using the original cost of Rs 500 and the original holding period would give Rs 10,000 as a long-term gain, which is wrong.

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