Bonus-Split- Rights issue - Which is better?

Although the terms - share split, bonus share or right are all connected with equity shares, there is not much similarity between them in reality. These announcements bring joy to the share holders i different ways, today we will understand more about them. One of the major misconceptions among the retail investors is that we think these words are interchangeable and can be loosely used to describe any change in the stock price.

	Stock Split	Bonus Share	Right Share
Definition	When the face value of a particular stock is split or reduced in a particular ratio, it is called as stock split.	When the existing shareholders get a free share in a predecided ratio, it is known as bonus share	It is an opportunity to existing shareholders to subscribe to additional shares at a discounted price over current market price. It is not compulsory for an investor to participate in the rights issue.
Outstanding Shares	Number of outstanding shares changes but the total value of holding remains the same	Number of outstanding shares changes but there is no change in the value of the holding	The number of outstanding shares changes but the shareholding pattern may or may not change after the issue.
Company reserves	It is not affected by the stock split	Since, the share holders get a free share it is usually paid by utilising the company reserves.	It does not affect the reserves of the company
Face Value	There is a deduction in face value of the share	There is no change in the face value of the share	There is no change in the face value of share
Benefit to Company	·   It brings more liquidity to the trading volumes	·    Increase liquidity and trade volumes ·    Affordability to small retail investors ·    Since, bonus is increasing the equity base it shows positivity of company future growth.	·  The company can raise funds without additional cost of advertisement. ·  The cost of additional funds is lower than issuing an offer for sale.
Benefit to Investors	·  Stock split increases the holding, also this gives keeps the investor in a better position to participate in future expansion.	·  High growth in wealth over long term ·  Usually a bonus issuing company means company has got good growth strategy	·     Access to own additional shares of any particular company at lower than market price
Taxation	The cost of acquisition of stock is considered to calculate the gains. If the date of acquisition is above 12 months then the entire stock lot after split is eligible for long term taxation (i.e tax exempt)	The bonus shares are to be held for at least a year’s time to be eligible for tax exemption. The cost of acquisition for bonus is nil. The period of holding is calculated from issue of bonus	The price paid for acquiring right issue is to be used  to calculate the capital gains. Beyond the year’s time frame the gains are exempt from tax.