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Investing

What Is a Stock Split and What Happens to Your Shares

A stock split cuts each share's face value and raises your share count in the same ratio, so your holding's value is unchanged and no tax is due.

AI

Written by Ananya Iyer

Published 19 October 2026·7 min read

On this page8 sections
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A stock split divides each share into more shares of lower face value. Hold 100 shares of ₹10 face value through a split into ₹2 shares and you get 500 shares on the record date. The price adjusts in the same ratio, so your holding’s value is unchanged and no tax is due at the split.

Key facts

Point What happens
Legal basis Section 61(1)(d), Companies Act, 2013: sub-division of shares, if the articles allow it, by resolution in a general meeting
Face value Falls in the split ratio (₹10 to ₹5 in a 1:2 split)
Number of shares Rises in the same ratio
Who gets the new shares Shareholders on the record date; under T+1 settlement the ex-date and record date are the same day
Credit to demat Usually within about two working days of the record date, as brokers such as Zerodha state
F&O contracts Strike and futures price divided, lot size and position multiplied, by the split factor
Tax at the split None; the original cost is spread over the new shares

How a split works: face value and share count

Under Section 61(1)(d) of the Companies Act, 2013, a company may sub-divide its shares into shares of a smaller amount than the memorandum fixes, if its articles authorise it, by altering the memorandum in a general meeting. For partly paid shares, the paid and unpaid proportion on each new share must stay the same as on the old one.

Take a company whose ₹10 shares trade at ₹1,500. It announces a split into shares of ₹2 face value, a 1:5 split.

Item Before the split After the split
Face value ₹10 ₹2
Your shares 100 500
Price (theoretical) ₹1,500 ₹300
Value of your holding ₹1,50,000 ₹1,50,000

The company’s share capital, reserves and your percentage ownership stay exactly as they were. The actual price after the split depends on trading, so the ₹300 figure is only the adjusted starting point.

Record date and when the new shares appear

The company fixes a record date and tells the stock exchanges in advance under Regulation 42 of the SEBI (LODR) Regulations, 2015. Since the December 2024 amendment, the notice period for most corporate actions is at least three working days, excluding the date of intimation and the record date. Regulation 42 specifically lists splits where stock derivatives are available.

  1. The board approves the split and the proposal goes to shareholders for approval.
  2. The company announces the record date to NSE and BSE.
  3. To be eligible, you must hold the shares at the end of the record date. With T+1 settlement, a purchase made on the day before the record date settles in time; the ex-date and record date fall on the same day.
  4. On the ex-date, the exchange shows the stock at the adjusted, lower price.
  5. The depositories credit the new shares to your demat account, usually within two working days.
  6. If the shares have not appeared after about four days from the record date, raise it with your broker.

Until the credit arrives, your broker’s app may show an apparent loss, because the price has dropped while the share count has not yet risen. That gap closes once the new shares are credited.

Tick sizes do not change at once: NSE keeps the existing tick size of a stock after a split until its next monthly review.

Effect on price, F&O lots and average cost

Futures and options

NSE adjusts all open derivative positions after the close of trading on the last cum-date, so the value of each position stays the same. For a split in the ratio A:B, the adjustment factor is A/B.

  • New strike price = old strike price divided by the factor.
  • New futures base price = old futures price divided by the factor.
  • New lot size and new position = old figure multiplied by the factor.

With a factor of 5, a ₹1,500 call with a lot of 500 becomes a ₹300 call with a lot of 2,500. Where the maths produces fractions, NSE rounds the strike and lot so that no open position has to be closed.

Average cost in your portfolio

Your total purchase cost stays the same and is spread over the larger number of shares. If you bought 100 shares for ₹1,00,000, your cost after a 1:5 split is ₹200 per share across 500 shares.

Stock split vs bonus issue

Feature Stock split Bonus issue
Face value Reduced Unchanged
Source Existing capital is divided Reserves or securities premium are converted into share capital
Paid-up share capital Unchanged Increases
Cost of new shares for tax Original cost spread over all shares Nil for the bonus shares
F&O adjustment factor (ratio A:B) A/B (A+B)/B

The tax difference matters most when you sell. Our guide to bonus shares covers the record date, credit timeline and tax on a bonus issue.

Tax: no event at the split, cost allocation on sale

A split is not a sale, so there is no capital gain when your shares are sub-divided. Tax arises only when you sell.

ItemDetails
Cost of acquisitionSection 55(2)(b)(v) of the Income-tax Act, 1961 says the cost of shares received on sub-division is worked out with reference to the cost of the original shares. The Income-tax Act, 2025, which applies to sales from 1 April 2026, repeats this in Section 90(9)(d)(iv).
Holding periodthe law does not say clearly whether it runs from your original purchase or from the split. Taxmann notes that the holding-period rule for financial assets “allotted without any payment” could be read to cover split shares, while the opposing reading counts from the original purchase because the cost is taken from the original shares. CBDT has not clarified the point.
Rates on listed sharesgains on shares held 12 months or less are taxed at 20%. Longer-held gains are taxed at 12.5% on the amount above ₹1,25,000 a year. Under the 2025 Act these rates sit in Sections 196 and 198; for FY 2025-26 sales, Sections 111A and 112A of the 1961 Act apply.

If you sell soon after a split, the holding-period question can decide whether the gain is short-term or long-term, so take advice from a chartered accountant where the amount is large. You can estimate the tax with the capital gains calculator, and our page on LTCG on shares explains the long-term rules. For how splits fit into trading generally, see stock market basics.

Frequently asked questions

What does a stock split mean?

The company divides each share into more shares of lower face value. You own more shares, each priced lower, and the total value stays the same.

Do I need to do anything to get split shares?

No. If you hold the shares in demat on the record date, the depositories credit the new shares automatically.

Is a stock split good or bad for shareholders?

It does not change the company’s value or your share of it. Only the number of shares and the price per share change.

If I buy on the record date, do I get the split?

No. Under T+1 settlement the ex-date is the record date, so you must buy at least one trading day earlier.

Why has my portfolio value dropped after a split?

The price adjusts on the ex-date, but the new shares may take up to two working days to appear. The value corrects once they are credited.

Is a stock split taxable?

No tax is due at the split. When you sell, the original cost is divided across all the shares you hold after the split.

What is the difference between a share split and a bonus issue?

A split lowers the face value; a bonus keeps it and creates new shares from reserves. Bonus shares carry a nil cost for tax.

Sources

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