It is the "Dividend Season" in Nepal! The part of the year when most of the companies held their annual general meetings. And of course declare dividends.

And here is one question that every investor may have in his mind. How is dividend income taxed in Nepal? Do you have to pay tax on dividends you receive?

Is dividend income in Nepal tax free? 

So, now you know how dividend payout is taxed in Nepal, are you wondering what happens in case of bonus shares? 

Taxation of bonus shares in Nepal

So what is a bonus share? 

When a company gives its existing shareholders additional shares without any additional cost to the shareholders, then such free shares are known as bonus shares. 

So, a profit making company may either distribute its profit to the shareholders in the form of dividends or it may issue additional shares without taking any money from the shareholders. A company may have cash flow problem despite earning good profits or it may have more exciting projects lined up, so it may want the shareholders to reinvest the profit in the company itself. This is why the company may issue bonus shares. 

So how do you think bonus shares are taxes in Nepal? Is it similar to tax on dividends? Do let us know in the comments below regarding your understanding of taxation of bonus shares in Nepal. 

Note: This article has been contributed by the Hamro Lagani, an initiative to help all investors in Nepal invest with confidence.