Chapter 4 of 5

Settlement, dividends, splits and bonuses

7 min read

What happens after you buy

Indian equity trades settle on a T+1 basis: shares and money change hands the next working day after the trade. You see the shares in your demat account shortly after.

Corporate actions

A corporate action is a decision by a company that affects its shareholders. The key date is the ex-date: you must own the shares before it to qualify.

Dividend: a share of profit paid in cash. The price typically adjusts down by about the dividend on the ex-date. Dividends are taxed in your hands at your slab rate.
Stock split: one share is divided into several, such as a ₹10 face value split into two of ₹5. Your holding doubles and the price halves; your total value does not change.
Bonus issue: free additional shares for each held, say one for one. The price adjusts down in proportion; again, total value does not change at once.
Buyback: the company buys its own shares, often at a premium to market.
Rights issue: existing shareholders are offered new shares, usually at a discount.
Demerger: a business is separated and shareholders receive shares of the new company.

A 1-for-1 bonus

You hold 100 shares at ₹400 each, worth ₹40,000.
After the ex-date you hold 200 shares at about ₹200, still worth about ₹40,000.
Your wealth did not rise; only the count and the price changed.

Key takeaways

Trades settle T+1.
Ex-date decides who receives a dividend, split, bonus or demerger shares.
Splits and bonuses change the number of shares and the price, not your total value.

This content is for education only and is not investment or tax advice. Mutual fund investments are subject to market risks; read all scheme-related documents carefully.