Same 100 shares. Three corporate actions. One wealth.
Start at 100 shares priced at Rs 800. A holding worth Rs 80000. Here is what each action does to it on the day it happens.
| On the day it happens | Bonus 1:1 | Split 5:1 | Dividend Rs 5 |
|---|
| Shares you hold after | 200 | 500 | 100 |
| Price per share after | 400 | 160 | 795 |
| Value of the holding | 80000 | 80000 | 79500 |
| Cash that reached your bank | 0 | 0 | 500 |
| What you are actually worth | 80000 | 80000 | 80000 |
All three leave you at Rs 80000. The dividend at least moved Rs 500 of the company's cash into your account. The bonus moved nothing anywhere. It is an accounting entry, reserves relabelled as share capital, and not one rupee crosses the company gate. On a bonus and a split the exchange resets the reference price on the ex date by the ratio. A dividend is not reset that way, the price simply tends to open about the payout lower.
| Now sell all 200 at Rs 900 | Rupees |
|---|
| Sale proceeds | 180000 |
| Cost the taxman allows on your original 100 | 80000 |
| Cost the taxman allows on the 100 bonus shares | 0 |
| Taxable gain | 100000 |
Exactly the gain you would have had with no bonus at all. The law prices those free shares at nil, and it is not being harsh. It is agreeing with the arithmetic.