Premium on issue of shares can be used for:
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → issue of bonus shares
Premium received on shares is credited to Securities Premium Account. It is a capital receipt, so the Companies Act allows it to be used only for a few listed purposes, the first of which is issuing fully paid bonus shares. It cannot be distributed as profit or moved to general reserve.
NCERT (2026-27 edition):
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