Right Share vs Bonus Share in Nepal:
Key Differences & Tax Treatment (2025)
A complete guide for NEPSE investors — understand what each share type means, how they are issued, and exactly how much tax you will pay.
Right shares are new shares offered to existing shareholders at a discounted price — you pay to buy them. Bonus shares are free additional shares given from a company's retained earnings or reserves. Tax-wise, right shares have no tax at issuance (only capital gains tax when sold), while bonus shares attract a 5% dividend tax on face value — now paid directly by the company since SEBON's 2025 reform.
- What is a right share in Nepal?
- What is a bonus share in Nepal?
- Key differences: right share vs bonus share
- Tax treatment in Nepal (2025)
- SEBON's 2025 reform on bonus share tax
- How to apply for a right share
- How bonus shares are credited
- Capital gains tax when you sell
- Impact on share price and portfolio
- Frequently asked questions
What is a right share in Nepal?
A right share (เค เคงिเคाเคฐเคชเคค्เคฐ เคธेเคฏเคฐ) is a preferential offer made by a listed company to its existing shareholders to purchase additional new shares — usually at a price below the current market price. It is one of the most common methods for companies listed on NEPSE to raise fresh capital without going to the general public first.
The "right" is a privilege given to current shareholders in proportion to their existing holding. If you own 100 shares and the company announces a 1:1 right issue, you are entitled to subscribe to 100 more shares. You are not forced to buy — you can either subscribe, partially subscribe, or sell your right entitlement in the secondary market during the trading window.
Regulated by SEBON
All right share issuances in Nepal must be approved by the Securities Board of Nepal (SEBON) under the Securities Act, 2063 and the Securities Issuance and Allotment Directive.
Key features of right shares
- ✅ Offered only to existing shareholders proportional to their holding
- ✅ Usually priced at par value (Rs 100) — below market price
- ✅ Shareholders can sell their entitlement on NEPSE if they don't wish to subscribe
- ✅ Requires shareholder to pay money to get the shares
- ✅ Increases total share capital and brings fresh funds into the company
What is a bonus share in Nepal?
A bonus share (เคฌोเคจเคธ เคธेเคฏเคฐ / เคฒाเคญांเคถ เคธेเคฏเคฐ) is a free additional share issued to existing shareholders from a company's accumulated profits, retained earnings, or specific reserves. It is also called a stock dividend because instead of distributing profits in cash, the company gives shareholders extra shares.
For example, if a company announces a 20% bonus share and you own 500 shares, you will receive 100 additional shares (20% of 500) at no cost to you. The company converts a portion of its reserves or profits into paid-up capital, and shareholders receive the equivalent in shares.
Bonus shares are free — but not fully tax-free
You do not pay any money to receive bonus shares, but a 5% dividend tax on face value is applicable. Since 2025, this tax is paid by the company on your behalf under SEBON's new directive.
You pay to subscribe
Offered to existing shareholders at par or discounted price. You must apply and pay within the application window to receive shares. Increases company capital.
You receive for free
Distributed from retained earnings or reserves. No payment required from the shareholder. Capitalizes existing reserves into equity — total company value stays the same.
Key differences: right share vs bonus share
| Feature | Right Share | Bonus Share |
|---|---|---|
| Definition | New shares offered at a discount to existing shareholders | Free shares distributed from profits/reserves |
| Cost to shareholder | Must pay (usually Rs 100 per share) | No payment required |
| Source of issuance | Company raises fresh capital from shareholders | Converts retained earnings/reserves to capital |
| Effect on company funds | Increases liquid cash in company | No change in total value — just capital restructuring |
| Effect on share price | Generally reduces market price proportionally | Generally reduces market price proportionally |
| Dividend tax at receipt | None — no tax at issuance | 5% on face value (Rs 5 per share) |
| Who pays the tax | N/A | Company pays on your behalf (since 2025 SEBON reform) |
| Capital gains tax | Applies when you sell | Applies when you sell |
| Shareholder choice | Can subscribe, partially subscribe, or sell entitlement | Automatically credited — no choice |
| Approval required | AGM + SEBON approval | AGM + SEBON approval |
| Allotment method | Proportional to current holding; applicants must apply via MeroShare | Automatically credited to DEMAT proportional to holding |
| Common in Nepal | Banks, finance companies, hydropower companies | Banks, insurance, hydropower companies |
Tax treatment in Nepal (2025)
Tax on shares in Nepal is governed primarily by the Income Tax Act, 2058 and amendments made through successive budget ordinances. Below is the complete tax picture for both right shares and bonus shares.
Important for capital gains calculation
When you later sell bonus shares, the cost basis (purchase price for CGT purposes) is considered as Rs 100 (face value), not zero — even though you received them free. This is the standard treatment in Nepal. For right shares, the cost basis is Rs 100 (the subscription price paid).
You hold 1,000 shares of a company. The company announces a 20% bonus share.
→ You receive: 200 bonus shares (1,000 × 20%)
→ Face value of each share: Rs 100
→ Total face value of bonus shares: Rs 20,000
→ Dividend tax (5%): Rs 1,000 — paid by the company on your behalf since 2025.
→ You receive 200 shares credited to your DEMAT with no action needed and no payment required from you.
SEBON's 2025 reform: who pays the bonus share tax?
This is one of the most important recent changes every NEPSE investor must know. Previously, individual shareholders had to personally pay the 5% dividend tax on bonus shares before the shares were credited to their DEMAT account. This process was cumbersome — shareholders had to visit banks or company offices, often facing long queues and delays.
Through the 10th amendment to the Securities Issuance and Allotment Directive, 2074, SEBON introduced a major reform that officially took effect in late 2025. Under this new rule:
Company pays tax directly
All listed companies must now calculate and pay the 5% dividend tax on bonus shares on behalf of shareholders — directly to the government.
No shareholder action required
Shareholders no longer need to visit banks or offices to pay any tax. Bonus shares are credited to DEMAT automatically after the company settles the tax.
Faster crediting timeline
Bonus shares are typically credited within 30–60 days after AGM approval and SEBON clearance, instead of being withheld due to unpaid shareholder taxes.
Track via MeroShare or broker portal
You can monitor your updated share (kitta) count on MeroShare or your broker's portal. CDS Nepal handles the actual crediting process.
Investor benefit
This reform eliminates a long-standing inconvenience. Investors now receive bonus shares faster without any paperwork or payment from their side. The company essentially absorbs the administrative burden of tax settlement.
How to apply for a right share in Nepal
The right share application process in Nepal is fully digital through MeroShare (meroshare.cdsc.com.np). Here is the step-by-step process:
SEBON approval
The company's AGM approves the right share proposal. SEBON then reviews and grants approval before the issue opens.
Check your entitlement
Log in to MeroShare and check the "My Aasar" or right share section to see how many shares you are entitled to subscribe based on your holding on the book closure date.
Apply during the window
Submit your application on MeroShare within the specified application window (usually 7–30 days). You can subscribe for your full entitlement or a partial amount.
Payment via ASBA
Payment is done through the ASBA (Application Supported by Blocked Amount) system. The amount is blocked in your linked bank account until allotment.
Allotment and DEMAT credit
After the application period closes, shares are allotted and credited to your DEMAT account. Unsubscribed entitlements may be offered to others or lapse.
Can you sell your right entitlement?
Yes! If you do not wish to subscribe, you can sell your right entitlement (right share kitta) in the NEPSE secondary market during the specified trading window. The entitlement trades like a regular share during this period.
How bonus shares are credited
Unlike right shares, bonus shares require no action from the shareholder. The process is entirely handled by the company and CDS Nepal:
AGM resolution
The company's Annual General Meeting (AGM) passes a resolution to issue bonus shares from retained earnings or free reserves.
SEBON clearance
SEBON reviews the company's reserves, financial position, and the bonus share proposal before granting clearance.
Company pays dividend tax
The company pays 5% dividend tax on the total face value of bonus shares to the Inland Revenue Department on behalf of all shareholders.
CDS Nepal credits shares
CDS Nepal (Central Depository System) credits the bonus shares to each eligible shareholder's DEMAT account. Typically done within 30–60 days of SEBON clearance.
Fractional shares handling
If the calculation results in a fraction (e.g., 10.5 kitta), CDS Nepal rounds down to 10 shares and converts the fractional part to a cash payment deposited to your linked bank account.
Capital gains tax when you sell
Once you sell either right shares or bonus shares on NEPSE, capital gains tax applies on your profit. The current rates (FY 2082/83) are:
| Investor Type | Holding Period | Capital Gains Tax Rate |
|---|---|---|
| Individual | More than 1 year | 7.5% |
| Individual | 1 year or less | 10% |
| Institutional / Company | Any period | 10% |
Capital gains tax is deducted at source (TDS) by CDSC at the time of sale settlement. The gain is calculated as:
Net Gain = Selling Price − Cost Basis − Broker Commission − SEBON Fee
Capital Gains Tax = Net Gain × applicable rate (7.5% or 10%)
For right shares: Cost Basis = Rs 100 (subscription price paid)
For bonus shares: Cost Basis = Rs 100 (face value, even though received free)
Broker commission rates (as of 2025)
Commission is tiered: approximately 0.36% for smaller trades, sliding to 0.243% for large trades. There is also a SEBON fee of 0.015% and a DP charge of Rs 25 per transaction.
Impact on share price and your portfolio
Effect on share price
Both right shares and bonus shares dilute the share price after issuance because the total number of shares increases. This is a purely mathematical adjustment — the market cap of the company does not automatically change, so the price per share adjusts downward proportionally.
For example, if a share trades at Rs 500 and the company issues 100% bonus shares (doubling total shares), the adjusted price is expected to fall to approximately Rs 250. However, actual market price depends on investor sentiment, company fundamentals, and demand.
Right share: actual new value created
A right share issue does genuinely increase the company's total assets because fresh cash comes in from shareholders. If the company uses that capital productively, it can enhance long-term earnings per share. However, in the short term, EPS (earnings per share) typically dilutes.
Bonus share: no new value — only restructuring
A bonus share does not bring any new money into the company. It simply converts reserves into paid-up capital. Total shareholder wealth (number of shares × adjusted price) theoretically remains the same immediately after issuance. Long-term, a bonus share signals that the company has sufficient retained earnings — which can be a positive indicator of profitability.
Investor tip
Receiving bonus shares is often perceived positively by the market in Nepal because it signals profitability. However, it can also reduce the market price per share significantly. Look at the company's fundamentals — not just the bonus announcement — before making trading decisions.
Frequently asked questions
๐ Key takeaways
- Right shares require shareholders to pay Rs 100 per share to subscribe; bonus shares are distributed for free.
- Bonus shares attract a 5% dividend tax on face value (Rs 5 per share). Right shares have no tax at issuance.
- Since SEBON's 2025 reform, companies pay the bonus share tax on behalf of shareholders — eliminating the previous hassle of manual payment.
- Capital gains tax applies when you sell either type: 7.5% for individual investors holding >1 year, and 10% for ≤1 year or institutional investors.
- The cost basis for capital gains tax is Rs 100 for both right shares and bonus shares.
- Right shares entitlements can be sold on NEPSE during the application window if you choose not to subscribe.
- Both share types dilute the share price proportionally — but only right shares bring fresh capital into the company.
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