Bonus share is issued by the company to its existing shareholders for free instead of cash dividend. Bonus shares are issued to capitalise the companies profits. In Bonus share issue company will convert the profits in to equity share and issue in free of cost to its existing shareholders. The issue of Bonus share is inthe form of proportion. Which is set by the company. According to share held by the shareholder proportion to that he will get the bonus share. The issue of Bonus share will increase the number of share in the market. To get the bonus share one need to purchase the share before the ex-dividend date.on the record date who has the share in their account such share holder will receive the bonus share. The reason to issue the bonus is convertion of profits in to capital.