Stock Split & Bonus Calculator | Adjust Average Cost
💡 Key Tips
- A split or bonus does not create wealth. Your total investment stays exactly the same — it is the same pizza cut into more slices.
- The record date decides eligibility. You must hold the shares as of the record date, which means buying before the ex-date given T+1 settlement.
- For capital gains purposes the original purchase date carries forward to the split shares, so your holding period is not reset.
- Bonus shares have a subtlety: their acquisition cost is treated as nil, and the holding period runs from the date the bonus shares were allotted, not from your original purchase.
- Brokers usually credit new shares within a few working days of the record date. Your demat may briefly show an odd quantity while the corporate action is processed.
⚠️ Things To Watch
- A reverse split reduces your share count. If you end up with a fractional entitlement, the company typically pays cash in lieu rather than issuing part shares.
- Historical charts must be split-adjusted before comparison. An unadjusted chart shows a phantom crash on the ex-date that never actually happened.
- The market price will not always adjust exactly by the ratio. Sentiment around improved liquidity often moves the stock on the ex-date.
- Bonus stripping — buying just before a bonus to book an artificial loss — is specifically disallowed under Section 94(8) of the Income-tax Act.
- Always verify the actual ratio and record date from the company’s exchange filing rather than a news headline.
📋 Disclaimer
This calculator is provided for educational and informational purposes only. It does not constitute financial, investment, or trading advice. Trading and investing carry substantial risk of loss and are not suitable for every investor. Past performance is not indicative of future results. Always consult a qualified financial advisor and conduct your own due diligence before making any trading or investment decisions.
📐 Corporate Action Adjustment Maths
1. Stock split
2. Bonus issue
3. Both actions together
4. Profit and loss after adjustment
A stock split and a bonus issue both increase your share count and reduce your per-share cost, while leaving your total investment unchanged. This guide explains the difference between them, the adjustment arithmetic, and how each is treated for tax in India. Educational only.
How a split differs from a bonus issue
In your demat account the two look almost identical — more shares appear and the price per share drops. Underneath, they are different corporate actions.
| Stock split | Bonus issue | |
|---|---|---|
| Source of shares | Existing shares subdivided | New shares from reserves |
| Face value | Falls by the split ratio | Unchanged |
| Reserves | Unchanged | Capitalised into share capital |
| Cost of acquisition | Original cost spread across more shares | Treated as nil for bonus shares |
A 1:5 split turns each share into five and cuts face value from ₹10 to ₹2. A 1:1 bonus gives one free share per share held, doubling the count while face value stays put.
Adjusting your quantity and average cost
Both actions are pure multipliers, so the arithmetic is simple. For a split, multiply quantity by the split factor and divide average cost by the same factor. For a bonus, the factor is one plus the bonus ratio.
Worked example. 500 shares bought at ₹2,400 is an investment of ₹12,00,000. After a 1:5 split you hold 2,500 shares at an adjusted cost of ₹480. The total is still ₹12,00,000 — the same pizza, cut into more slices.
A 1:1 bonus on the same holding gives 1,000 shares at ₹1,200. If both actions occur, the factors multiply: a 1:5 split plus a 1:1 bonus gives a combined factor of 10, so 500 shares at ₹2,400 becomes 5,000 shares at ₹240.
Always compare the market price against the adjusted cost. Comparing it against your old pre-split figure makes a profitable holding look like a collapse.
Record date, ex-date and tax treatment
Eligibility is decided by the record date. You must hold the shares on that date, which with T+1 settlement means buying before the ex-date. Verify the ratio and the dates from the company’s exchange filing rather than a news headline.
For tax purposes the treatment differs between the two actions. With a split, your original purchase date carries forward to the resulting shares, so the holding period is not reset and the original cost is simply spread across the larger quantity.
Bonus shares work differently. Their cost of acquisition is treated as nil, and the holding period runs from the date the bonus shares were allotted rather than from your original purchase. Section 94(8) of the Income-tax Act specifically disallows bonus stripping, which is buying just before a bonus to book an artificial loss. Tax rules change, so confirm the current position with a qualified tax adviser.
Charts, reverse splits and fractions
Historical charts must be split-adjusted before you compare periods. An unadjusted chart shows a dramatic crash on the ex-date that never actually happened — it is purely the arithmetic of the split. Most charting platforms adjust automatically, but it is worth confirming.
A reverse split works in the opposite direction, reducing your share count and raising the per-share cost. A 2:1 reverse split turns 500 shares at ₹2,400 into 250 shares at ₹4,800.
Fractional entitlements arise when the ratio does not divide evenly into your holding — a 1:3 bonus on 100 shares, for instance. Companies do not issue part shares; they typically pay cash in lieu of the fraction. Brokers usually credit the new shares within a few working days of the record date, and your demat may briefly show an unusual quantity while the action is processed.
Related tools: Stock market events calendar · XIRR calculator
Frequently asked questions
Do I make money from a stock split?
No. A split multiplies your share count and divides your per-share cost by the same factor, leaving the total value of your holding unchanged. It creates no wealth on its own. Any price movement around the event reflects market sentiment rather than the split itself.
What is the difference between a split and a bonus issue?
A split subdivides existing shares, so face value falls by the split ratio. A bonus issue creates new shares by capitalising reserves, so face value stays the same. They also differ in tax treatment: bonus shares carry a nil cost of acquisition, while split shares inherit the original cost.
How do I calculate my average price after a bonus issue?
Divide your original average cost by one plus the bonus ratio. For a 1:1 bonus the factor is 2, so an average cost of 2,400 rupees becomes 1,200 rupees while your share count doubles. Your total investment is unchanged.
What happens to fractional shares in a bonus issue?
Companies do not issue part shares. Where the ratio produces a fraction, the company normally pays cash in lieu of that fractional entitlement. The exact treatment is set out in the corporate action notice filed with the exchange.
Educational and informational content only. EquityTimer is not a SEBI-registered investment adviser and does not provide buy, sell or hold recommendations. Data may contain errors or delays; verify independently and consult a registered financial adviser before making any investment decision.