what is a bonus issue 
a bonus issue also known as a scrip issue or a capitalization issue is an offer of free additional shares to existing shareholders for example a company may give one bonus share for every five shares held companies issue bonus shares to attract further investment and reward shareholders understanding bonus issuesbonus issues increase a company s outstanding shares but not its market capitalization companies usually fund a bonus issue through profits or existing share reserves the issuance of bonus shares is not taxable however shareholders must still pay capital gains tax if they sell them for a net gain a company allocates bonus issues according to each shareholder s stake bonus shares do not dilute shareholders equity because they are issued in a constant ratio that keeps the relative equity of each shareholder the same as before the issue for example a three for one bonus issue entitles each shareholder three shares for every one that they hold before the issue a shareholder with 1 000 shares receives 3 000 bonus shares 1 000 3 1 3 000 2a company s share price proportionally adjusts to the number of bonus shares issued 