In the last blog, we discussed the common corporate actions, the reasons a company may carry those out, and the implication on shareholders. In this piece, we will be breaking down corporate actions through the taxation angle. If you haven’t read the first blog in this series, please click here to read the same. Before we begin, let’s take a minute to understand how equity shares are taxed. You can either incur capital gains or a capital loss on the sale of your equity shares (Profit/Loss on the sale of your shares). The capital gains are calculated by deducting the purchase cost from the sale value. The taxes are levied on these …

Corporate actions help investors get an idea of how the management plans to maintain the company’s future path. These periodic events affect investors and the company’s financial structure in various ways. Understanding their implications can help you make investment decisions & understand the company’s financial prospects. This article discusses the five common corporate actions – Dividends, bonuses, Splits, Rights, and Buybacks. DIVIDEND Dividends are a medium through which the company distributes its profits to the shareholders. Companies are not obligated to pay dividends to the shareholders. Some companies choose instead to use the reserves for expansion and future growth. Dividend payments have a specific timeline to shortlist all the eligible beneficiaries. Some of the …