A bonus issue is when a company issues free additional shares to existing shareholders in a fixed ratio as a reward.

Here are the key things to keep in mind:

1. Eligibility – Only shareholders who hold shares in their demat account on the record date set by the company are entitled to bonus shares.
2. Credit of Shares – Bonus shares are allotted after regulatory and exchange approvals; they may take a few days to reflect in your demat.
3. Effect on Share Price – The share price is adjusted downward in proportion to the bonus ratio, but your total investment value remains the same since your shareholding increases.
4. Trading of Bonus Shares – Newly allotted bonus shares are usually temporarily non-tradable until they are listed by the exchange; after listing, they can be freely traded.