What are corporate actions?
Corporate actions are events initiated by a listed company that affect its shareholders. These are not trades you place — they happen automatically based on your holding on the record date. Your broker and the depository process these changes in your demat account.
As a shareholder, you don't need to do anything for most corporate actions. The shares or cash are credited directly. But some brokers treat the processing as a service and charge a fee.
Types of corporate actions
- Bonus issue: The company gives free additional shares to existing holders. A 1:1 bonus means you get 1 extra share for every share you own. Your total value stays the same — the price adjusts proportionally.
- Stock split: The company splits each share into smaller units. A 1:5 split turns 1 share of ₹500 into 5 shares of ₹100 each. Total value unchanged, but liquidity improves.
- Dividend: Cash paid directly to shareholders. This is credited to your bank account. TDS is deducted if total dividend exceeds ₹5,000 in a financial year.
- Rights issue: The company offers existing shareholders the right to buy new shares at a discounted price. You can subscribe, renounce, or let the rights lapse.
- Buyback: The company offers to repurchase shares from holders at a premium. You can tender your shares through your broker if you wish to participate.
Do brokers charge for corporate actions?
The good news: most brokers in India do not charge separately for standard corporate actions like bonus issues, stock splits, and dividends. These are processed automatically at no extra cost.
However, there are edge cases to be aware of. Some full-service brokers charge a processing fee for rights issue applications or buyback tenders — typically ₹20–₹50 per request. A few brokers also levy a nominal charge for name changes or mergers that require demat account updates.
Discount brokers like Zerodha, Dhan, Groww, and mStock handle all standard corporate actions for free. The processing is automated and no manual intervention is needed.
What to watch out for
- Record dates: You must hold the shares before the record date (T+1 settlement means you need to buy at least 1 day before). Missing the date means missing the corporate action.
- Rights issue deadlines: Unlike bonus or splits, rights issues have a subscription window. If you don't act within the deadline, your rights lapse and you get nothing.
- Fractional entitlements: In bonus or splits, if your holding doesn't divide evenly, you may receive cash in lieu of fractional shares.
- Tax implications: Bonus shares have zero cost of acquisition for tax purposes. Dividends are taxed at your slab rate. These aren't broker charges, but they affect your net returns.