Bonus Share Issue — MCA Filing

A bonus issue is authorised under Section 63 of the Companies Act 2013 read with Rule 14 of the Companies (Share Capital and Debentures) Rules 2014. Shares can only be issued out of free reserves, the securities premium account, or the capital redemption reserve. Revaluation reserves cannot be capitalised for this purpose.

The board recommends the bonus issue at a board meeting conducted in compliance with SS-1. Shareholder approval is passed by ordinary resolution under Section 63(2) of the Companies Act 2013, specifying the ratio and the reserve being capitalised. The articles may allow the board to act without a shareholder resolution, but this needs to be verified before proceeding.

Receipt of bonus shares is not taxable in the year of allotment. The cost of acquisition is treated as nil (or FMV as on January 31, 2018 for listed shares acquired before that date under the grandfathering provision). On eventual sale, capital gains arise under Section 45 of ITA 1961 (Section 67 of ITA 2025 for TY 2026-27 onwards), with the holding period counted from the date of allotment of the bonus shares.

The company must file Form PAS-3 (Return of Allotment) with the Registrar of Companies within 30 days of allotment under Section 39(4) of the Companies Act 2013 read with Rule 12 of the Companies (Prospectus and Allotment of Securities) Rules 2014. The register of members and the balance sheet must reflect the increased paid-up capital before the form is filed.

Section 63(3) of the Companies Act 2013 prohibits a bonus issue if the company has defaulted on payment of statutory dues — provident fund, gratuity, or ESIC contributions — or has outstanding fixed deposits or debentures in arrears. The board must also confirm that the authorised share capital is sufficient to accommodate the new shares; an increase under Section 61 may be needed first.