Section 62 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 62 draws a hard line: only net profits of a multi-State co-operative society may be divided among members, and the rest of its funds may not. It also lists what is deducted from gross profit to reach net profit, and it says what happens to the surplus of a society that has no share capital. Section 62 was not amended in 2023. It is stated here as per the Ministry of Cooperation copy of the Act read with the Multi-State Co-operative Societies (Amendment) Act, 2023.
No part of the funds, other than net profits, may be divided by way of bonus or dividend or otherwise distributed among members (s.62(1)). Net profits of a society earning profits are worked out by deducting a list of charges and provisions from gross profit for the year (s.62(2)). A society may add to net profits interest accrued in earlier years but actually recovered during the year. A society without share capital does not treat its surplus of income over expenditure as net profits; the surplus is dealt with in accordance with the bye-laws.
Section 62(1): the rule
"No part of the funds, other than net profits, of a multi-state cooperative society shall be divided by way of bonus or dividend or otherwise distributed among its members."
The rule has three features. It covers "funds", which is wider than profits, so the capital, reserves and other funds of the society are inside it. It lists "bonus or dividend or otherwise", so the form of distribution does not matter. And the single exception is "net profits". Anything that is not net profit within the meaning of sub-section (2) cannot be paid out to members.
The rule connects to the section that follows, which says how the net profits are to be disposed of; see our note on disposal of net profits and the co-operative education fund. A society unsure whether a proposed payout is within section 62 can take advice from our legal consultation team before the general body meeting.
Section 62(2): how net profits are calculated
Net profits, "in respect of a society earning profits", are calculated "by deducting from the gross profit for the year" the following, which we list as printed:
| No. | Deduction |
|---|---|
| 1 | all interest accrued and accruing in relation to amounts which are overdue |
| 2 | establishment charges |
| 3 | interest payable on loans and deposits |
| 4 | audit fees |
| 5 | working expenses including repairs, rent, taxes and depreciation |
| 6 | bonus payable to employees under the law relating to payment of bonus for the time being in force, and equalisation fund for such bonus |
| 7 | provision for payment of income-tax and making approved donations under the Income-tax Act, 1961 (43 of 1961) |
| 8 | development rebate |
| 9 | provision for development fund |
| 10 | bad debt fund |
| 11 | price fluctuation fund |
| 12 | dividend equalisation fund |
| 13 | share capital redemption fund |
| 14 | investment fluctuation fund |
| 15 | provision for retirement benefits to employees |
After these, net profits are further reduced "after providing for or writing off bad debts and losses not adjusted against any fund created out of profit".
A few points on reading the list. The list is part of one long sentence and the print runs the items together; the numbering above is ours for readability. The first deduction covers "interest accrued and accruing" on overdue amounts, so overdue interest that has not been received is taken out of profit. The Act names the Income-tax Act, 1961; check the current law for the corresponding provision. For tax treatment, see our income-tax guides, for example our guide on co-operative society taxation. This article states no tax section or rate.
"Development rebate" is listed without explanation, and the Act does not define it in this section. The employees' bonus is referred to "the law relating to payment of bonus for the time being in force", a law the Act does not name.
First proviso: earlier interest recovered later
"Provided that such society may added to the net profits for the year interest accrued in the preceding years, but actually recovered during the year." The print says "may added", a slip for "may add" or "may be added"; we quote it as printed. The effect is that interest that was left out of profit in an earlier year, because it was overdue, can be brought in when it is actually recovered.
Second proviso: a society without share capital
"Provided further that in the case of such multi-state cooperative societies as do not have share capital, the surplus of income over expenditure shall not be treated as net profits and such surplus shall be dealt with in accordance with the bye-laws."
For such a society there is no "net profit" to distribute under the section. The surplus is dealt with as the bye-laws provide. The Act does not say in this section what the bye-laws may provide.
What the section leaves unsaid
Section 62 says what cannot be distributed and how net profit is arrived at. It does not say how much of the net profit goes to each purpose; that is the work of section 63, which deals with the disposal of net profits. The section also does not say what follows if funds are distributed in breach; consequences for the society and its officers must be sought in other parts of the Act.
A practical example
Vijay Multi-State Co-operative Credit Society has a gross profit for the year. Its accountant deducts overdue interest, establishment charges, interest on deposits, audit fees, working expenses, the employees' bonus and provisions for the funds listed in section 62(2), and writes off bad debts not adjusted against any fund created out of profit. What is left is the net profit. During the year the society also recovered interest that accrued in earlier years; under the first proviso it may add that to the net profit. The board proposes to pay a bonus out of the general reserve as well. Section 62(1) bars that: only net profits can be divided. Another society, a marketing federation without share capital, ends the year with a surplus of income over expenditure; under the second proviso that surplus is not net profit and is dealt with according to its bye-laws.
What the 2023 Amendment Act changed
| Provision | Before | After |
|---|---|---|
| s.62 | As printed above | Unchanged |
The related change is in section 63(1)(b): one per cent of net profit is credited annually to the co-operative education fund, as substituted in 2023. The 2023 Amendment Act is Act 11 of 2023 and came into force on 3 August 2023 by notification S.O. 3493(E). The principal Act came into force by notification, date not in the source.
Need help with profit distribution?
Before a general body approves a bonus or dividend, the board should check that what is proposed is net profit under section 62(2) and that the deductions have been taken. A short review by our legal consultation team can help you map each head to your accounts.
Key takeaways
- Only net profits may be divided among members; no other fund may be distributed.
- Net profits are gross profit for the year less the heads listed in section 62(2) and less bad debts and losses not adjusted against any fund created out of profit.
- Interest accrued in earlier years but actually recovered during the year may be added to net profits.
- A society without share capital does not treat its surplus as net profits; the bye-laws govern.
Read next
- Disposal of net profits and the co-operative education fund (section 63)
- Deduction from salary and Government aid (sections 60 and 61)
- Investment of funds (section 64)
- Multi-State Co-operative Societies Act, 2002: complete guide
Disclaimer: Based on the Ministry of Cooperation copy of the Multi-State Co-operative Societies Act, 2002 read with the Multi-State Co-operative Societies (Amendment) Act, 2023 (in force from 3 August 2023), as consulted on 2 October 2026. The Multi-State Co-operative Societies Rules, 2002 as amended, later notifications and later amendments are not covered and should be checked. This article is general information, not legal advice; check the official text before acting.