When does Bonus Share get credited in Demat Account?

In the world of stock market investing, you have heard about bonus shares. Bonus shares are the process of distributing a portion of the company’s profit to the shareholders. However, investors have a common query on when will bonus shares be credited to Demat account.

Understanding the time and procedure is essential for investors to track their holdings properly. This blog analyses the bonus share credit in Demat account and how you can get it in your Demat account.

Bonus Share Issue Meaning

Generally, a company shares a portion of its profit with shareholders as a form of dividend. However, without a cash flow transaction, the corporation can also share a portion of its profits among them. Offering bonus shares is a great option to do this. Bonus shares are additional shares that a company provides to the existing shareholders free of cost.

Companies distribute these shares based on the percentage of existing ownership. For instance, if a company issues bonus shares with a predefined proportion of 3:1, the shareholders will receive three new shares for each existing share. If you hold 100 shares of that company, you will have a total of 300 shares.

A bonus share acts as an assurance that the company guarantees an increase in its profits and dividend distribution in the future. Hence, issuing bonus shares also enhances a company’s goodwill.

Eligibility Criteria for Allotment of Bonus Shares

Companies determine who is eligible to earn bonus shares using the record date. To distribute bonus shares, companies set a record date to ascertain several existing shareholders. Bookkeepers of the company verify the record date with the records to identify stockholders.

The companies also set an ex-date, which is the last date to buy the company’s stock to become eligible for a bonus share issue. Shareholders joining the company after the ex-date are not eligible for bonus shares. Indian stock markets follow a T+2 rolling system for share deliveries, in which the ex-date is two days before the record date.

When are Bonus Shares Credited in a Demat Account?

The time for bonus share credit in Demat account takes a timeframe of 15 to 20 days after the record date. Post record date, companies finalise shareholder data and take corporate action using depositories like Central Depository Services Limited (CDSL) and National Securities Depository Limited (NSDL). These depositories distribute and process bonus shares, which will appear in investors’ accounts.

Shareholders should verify the credit of shares by checking their Demat account statement and getting updates from the online portal of these depositories. A temporary International Securities Identification Number (ISIN) keeps bonus shares and cannot be used for trading.

They become tradable after receiving trading approval in 4-5 days and are transferred to a permanent ISIN. Shareholders can find bonus shares in their Demat account after this approval process.

How Can You Get Bonus Shares?

The company required procedures like obtaining approvals from the Securities and Exchange Board of India (SEBI) once the record date had passed. After completing these procedures, eligible shareholders can find bonus shares in their Demat account. It takes 15-20 working days after the issuance of bonus shares.

To become eligible for a bonus share credit in Demat account, you should purchase company shares before the ex-date.

You should be aware of company announcements regarding bonus share issues for existing holdings by actively watching press releases, exchange filings, and investor presentations. This practice helps you to keep track of updates. Additionally, you should not sell shares before the record date to maintain eligibility.

Final Thoughts

Bonus share credit in Demat account is important to understand, as shareholders can gain additional shares without any cost. Shareholders have to purchase shares from a company before the ex-date to become eligible to receive bonus shares. Companies take 15-20 days after the record date to transfer bonus shares to your Demat account.

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Frequently Asked Questions

1. What is the difference between a record date and ex-date?

Companies set the record date to finalise the eligible shareholders list, while the ex-date is the deadline before which the shareholders should purchase the company shares to become eligible for the bonus shares.

2. Why are bonus shares not credited to a demat account?

The primary reason behind bonus shares not being credited to a Demat account is that you have failed to be eligible to receive bonus shares.

3. How can I check my bonus shares in the Demat account?

To check the credit status of bonus shares in your Demat account, you need to log in to your Demat account and search for the company’s name to see the revised total quantity. After confirming the quantity of shares, you must download a statement which shows the credit of bonus shares.

4. Can we sell bonus shares immediately?

Bonus shares are credited to your Demat account after 15 days from the ex-date. Hence, investors cannot sell shares immediately before they are credited to their Demat account.