Sections 31 and 32 of the Code on Wages, 2019: Allocable Surplus and Computation of Gross Profits

Updated: 16 September 2026

Current legal position: Sections 31 and 32 of the Code on Wages, 2019 are in force from 21 November 2025. Section 31 governs payment of bonus out of the allocable surplus, while Section 32 provides the basis for computation of gross profits. The Central Rules prescribe the computation method for banking companies and other establishments.

The bonus provisions in Chapter IV of the Code on Wages, 2019 use a linked sequence of calculations. For Sections 31 and 32, the important expressions are allocable surplus, available surplus and gross profits. Section 31 fixes the percentage of available surplus treated as allocable surplus, while Section 32 directs how gross profits are to be computed.

Section 31 - Payment of bonus out of allocable surplus

Meaning: Section 31 identifies the portion of the available surplus that constitutes the allocable surplus from which bonus is paid. The available surplus itself is calculated under Section 33.

Section 31(1): Bonus is paid out of allocable surplus. The allocable surplus is an amount equal to 60 per cent of the available surplus in the case of a banking company and 67 per cent in the case of other establishments. Available surplus is calculated in accordance with Section 33.

Section 31(2): Audited accounts of companies shall not normally be questioned.

Section 31(3): If there is a dispute regarding the quantum of bonus, the authority notified by the appropriate Government having jurisdiction may require the employer to produce the balance sheet. Information in the balance sheet is not to be disclosed unless the employer agrees.

How Section 31 works

Section 31 does not independently calculate the available surplus. It applies the statutory percentage to the available surplus calculated under Section 33. Accordingly, computation of bonus may require reading Sections 31 to 36 together.

Section 32 - Computation of gross profits

Meaning: Section 32 provides that the gross profits derived by an employer from an establishment for an accounting year are to be calculated in the manner prescribed by the Central Government.

Section 32(a): In the case of a banking company, gross profits are calculated in the manner prescribed by the Central Government.

Section 32(b): In any other case, gross profits are calculated in the manner prescribed by the Central Government.

Rules for computation of gross profits

Under the Central rules currently published by the Ministry of Labour and Employment, Rule 23 provides that gross profits for a banking company under Section 32(a) are calculated in the manner specified in Schedule B. Rule 24 provides that gross profits in cases other than banking companies under Section 32(b) are calculated in the manner specified in Schedule C.

Relationship with Sections 33 to 36

After gross profits are determined under Section 32, Section 33 deals with computation of available surplus. Section 34 specifies sums deductible from gross profits as prior charges, Section 35 deals with calculation of direct tax payable by the employer, and Section 36 deals with set-on and set-off of allocable surplus.

This page is a general legal information resource. For an actual bonus dispute or computation, the applicable Central or State rules, notifications, accounting records and facts of the establishment should also be examined.