Section 31 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Section 31 of the Code on Wages, 2019 defines the pool from which bonus is paid. The allocable surplus is 67 per cent of the available surplus for an establishment other than a banking company, and 60 per cent for a banking company. It also protects audited company accounts from being routinely questioned and limits how a balance sheet can be called for in a dispute.
Bonus is paid out of the allocable surplus, which is sixty per cent of the available surplus for a banking company and sixty-seven per cent for any other establishment (s.31(1)). The available surplus is worked out under section 33. Audited accounts of companies shall not normally be questioned (s.31(2)). In a dispute about the quantum of bonus, the notified authority may call upon the employer to produce the balance sheet, but may not disclose its contents unless the employer agrees (s.31(3)).
Sub-section (1): from available surplus to allocable surplus
The chain of computation runs in four steps:
- Gross profits for the accounting year are computed under section 32, in the manner prescribed (Appendices B and C to the Central Rules).
- The sums in section 34 are deducted as prior charges.
- The available surplus is the result under section 33, with the direct-tax adjustment in its proviso for later years.
- The allocable surplus is a fixed share of that figure.
| Employer | Allocable surplus = | Reference |
|---|---|---|
| Banking company | 60 per cent of the available surplus | s.31(1) |
| Any other establishment | 67 per cent of the available surplus | s.31(1) |
Hypothetical example. An establishment other than a banking company has an available surplus of Rs 10,00,000 for the accounting year. The allocable surplus is 67% of Rs 10,00,000 = Rs 6,70,000. A banking company with the same available surplus would have 60% = Rs 6,00,000. The figures are invented only to show the arithmetic.
The allocable surplus is a pool for the whole establishment. Bonus for individual employees is then paid within the limits of section 26, which sets the minimum (8.33 per cent of wages or Rs 100, whichever is higher) and the maximum (20 per cent of wages). If the pool exceeds the maximum bonus payable, the excess may be carried forward under section 36; if it falls short of the minimum bonus, the minimum is still payable and the shortfall is carried for set-off.
Employers who compute the pool each year can have the working checked, from gross profit to allocable surplus, through our payroll compliance audit service.
Two cautions. First, the section does not define "banking company"; the percentage applies by the nature of the employer. Second, the Appendix A example in the Central Rules assumes sixty or sixty-seven per cent of available surplus as "allocable as bonus" in column (2), consistent with this section.
Sub-section (2): audited accounts
Audited accounts of companies shall not normally be questioned. The word "normally" leaves room for exceptions, which the text does not list. In practice a union or employee representative who disputes a company's figure faces a presumption that the audited numbers stand. See also the presumption about the balance sheet in section 47.
For non-corporate employers, the Code deals with audit of accounts separately in section 48. Sub-section (2) names only companies.
Sub-section (3): disputes about quantum and the balance sheet
Where there is a dispute regarding the quantum of bonus, the authority notified by the appropriate Government having jurisdiction may call upon the employer to produce the balance sheet before it. But the authority shall not disclose any information contained in the balance sheet unless agreed to by the employer.
| Feature | Effect |
|---|---|
| Who can ask | The authority notified by the appropriate Government having jurisdiction |
| What can be asked | Production of the balance sheet |
| Limit | No disclosure of its contents unless the employer agrees |
The text does not say what the authority can do with the information it reads but may not disclose. It does not say whether the profit and loss account can also be called for, or how a union can test the quantum without seeing the balance sheet. These points are for the rules and the dispute procedure; see sections 46 and 47 when published, and the Code's claims provisions.
What the Central Rules add
The Code on Wages (Central) Rules, 2026 (G.S.R. 343(E), 8 May 2026) apply only where the Central Government is the appropriate Government. Where the State Government is the appropriate Government, the State's own wage rules apply.
The Rules do not change the percentages in s.31. They supply the inputs: rule 24 and Appendix B for gross profits of a banking company, rule 25 and Appendix C for other employers, rule 26 and Appendix D for further sums deducted as prior charges, and Appendix A for an illustrative table of allocable surplus, bonus, set-on and set-off over ten years. See Rules 24 to 26 and the Appendices A to D. For the old-law comparison, see our guide on the allocable surplus method under the Payment of Bonus Act.
Need help with the bonus pool?
The allocable surplus is only as accurate as the gross profit and prior-charge workings behind it. Our payroll compliance audit team can recompute your available and allocable surplus, test the min-max bonus range and prepare the working papers.
Key takeaways
- Allocable surplus is 67 per cent of available surplus, or 60 per cent for a banking company.
- Available surplus comes from gross profits after prior charges under ss.32 to 35.
- Audited accounts of companies are not normally questioned.
- In a quantum dispute the authority may call for the balance sheet but cannot disclose its contents unless the employer agrees.
- The Central Rules supply the computation tables; the percentages stay as in the Code.
Read next
- Sections 29 and 30: disqualification for bonus and departments of an establishment
- Sections 32 and 33: computation of gross profits and available surplus
- Appendices A to D of the Central Rules: bonus, set on, set off and gross profit computation
- Calculation of bonus: the allocable surplus method
Disclaimer: Based on the Code on Wages, 2019 (as enacted) and, where noted, the Code on Wages (Central) Rules, 2026 (G.S.R. 343(E), 8 May 2026), as on 1 October 2026. The Code is in force from 21 November 2025; State Governments make their own rules for establishments where the State is the appropriate Government, and wage rates are notified separately. Verify the current position before acting.