According to reports from Personal Finance News, dividend income, bonus shares, and stock splits are treated differently under taxation despite appearing similar. Dividend income is taxed at slab rates just like salary and interest, while bonus shares and stock splits are not taxable when received. The key distinction lies in when taxability arises - dividends are taxed immediately, while bonus shares and stock splits become taxable only when sold and gains are booked.
As reported by Personal Finance News, when selling shares received through bonus or stock splits, the taxation depends on the holding period. Capital gains from selling bonus shares are taxed as short-term or long-term capital gains, with the holding period starting from the date of allotment. Stock split shares are taxed as long-term or short-term capital gains based on the adjusted cost, with the holding period starting from the original purchase date. Any capital gains must be reported under Schedule CG of ITR-2, with ITR-1 being suitable only for long-term gains not exceeding ₹1.25 lakh.
According to Personal Finance News, for individual taxpayers, dividend income can be reported as 'Income from Other Sources' in both ITR-1 and ITR-2 forms. If TDS has been deducted on dividends, it is reflected in Form 26AS and AIS, allowing automatic credit claims. Capital gains from bonus and split shares sold must be reported under Schedule CG only in ITR-2, making ITR-2 mandatory for taxpayers with such capital gains. The due date for ITR filing for AY 2026-27 is July 31, 2026.
As reported by Personal Finance News, when receiving dividends, bonus shares, or stock splits, investors should understand the tax implications from the outset. Dividends are taxed at slab rates immediately, while bonus shares and stock splits become taxable only upon sale. The tax treatment varies significantly based on whether the investor holds the shares for short-term or long-term periods, making the holding period crucial for tax planning. Investors should carefully track their cost basis and holding periods to optimize their tax liability when selling these securities.
