For determining whether capital gains on sale of bonus shares are long-term or short-term, the period of holding of the bonus shares is reckoned from:
AThe date the original shares were acquired
BThe date of the board resolution recommending the bonus
CThe date of allotment of the bonus shares
DThe first day of the financial year of allotment
Answer & Solution
Correct answer: C. The date of allotment of the bonus shares
1. Explanation 1 to section 2(42A) contains special period-of-holding rules for shares acquired without payment.
2. For bonus shares (any financial asset allotted without payment on the basis of holding any other financial asset), the holding period runs from the date of allotment of the bonus shares.
3. They do not inherit the holding period of the original shares — unlike gifted or inherited assets, which include the previous owner's period.
4. Option A is the trap: original-share history counts for gift/inheritance under section 49(1), never for bonus allotments.
_Source: ICAI CA Inter P3(A) Income-tax SM (May 2026), Ch 3 Unit 4 Capital Gains, PDF p. 13_
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