Sections 33 and 34 of the Code on Wages, 2019: Available Surplus and Deductions from Gross Profits
Sections 33 and 34 form part of Chapter IV on payment of bonus. They explain how an employer's available surplus is determined and which prior charges must be deducted from gross profits before the surplus is used for bonus calculations.
Section 33: Computation of available surplus
Meaning: "Available surplus" is the amount arrived at after the statutory deductions under section 34 are made from the gross profits for the accounting year. For accounting years covered by the proviso to section 33, a specified direct-tax adjustment relating to the immediately preceding accounting year is also included.
Section 33 provides, in substance, that:
The available surplus for an accounting year is the gross profits for that year less the sums referred to in section 34.
For an accounting year commencing after the Code came into force, and for every subsequent accounting year, the available surplus also includes the difference between the direct tax calculated on the preceding year's gross profits and the direct tax calculated on those gross profits after deducting the bonus paid or payable for that preceding year. The direct-tax calculation is governed by section 35.
How Section 33 works
- Determine gross profits under section 32 and the applicable rules.
- Deduct the prior charges specified in section 34.
- Where the proviso to section 33 applies, add the prescribed preceding-year direct-tax difference calculated in accordance with section 35.
- The resulting amount is the available surplus used in the statutory bonus framework, subject to the other provisions of Chapter IV.
Section 34: Sums deductible from gross profits
Meaning: Section 34 identifies the amounts that must be deducted as prior charges from gross profits when calculating available surplus.
The deductible sums are:
(a) Depreciation: depreciation admissible under section 32(1) of the Income-tax Act, 1961, or under the applicable agricultural income-tax law, as the case may be.
(b) Direct tax: subject to section 35, the direct tax payable by the employer for the accounting year on the employer's income, profits and gains for that year.
(c) Further prescribed sums: any further sums relating to the employer that are prescribed by the Central Government.
Further deductions under the Code on Wages (Central) Rules, 2026
Rule 26 of the Code on Wages (Central) Rules, 2026 provides that the further sums specified in Appendix D are deductible from gross profit as prior charges under section 34(c). Appendix D specifies deductions for categories including companies other than banking companies, banking companies, corporations, co-operative societies and other employers. The exact deduction therefore depends on the employer's legal category and the facts shown in its accounts.
Related computation rules
Under the Central Rules, 2026, rule 24 prescribes computation of gross profits for a banking company through Appendix B, rule 25 prescribes computation for employers other than banking companies through Appendix C, and rule 26 links section 34(c) to the further sums in Appendix D.
Relationship between Sections 32, 33, 34 and 35
The provisions operate as a sequence. Section 32 determines gross profits; section 33 converts gross profits into available surplus; section 34 identifies the prior charges deductible in that process; and section 35 lays down how direct tax payable by the employer is calculated for purposes of the Code. Sections 31 and 36 then connect the surplus calculation with allocable surplus, bonus and the statutory set-on/set-off mechanism.
Official legal sources
For the authoritative text, refer to the Code on Wages, 2019 on India Code, the 21 November 2025 commencement notification, and the Code on Wages (Central) Rules, 2026 issued by the Ministry of Labour and Employment.
This page is a general legal information resource. Statutory text, applicable rules, notifications and the facts of the particular establishment should be checked for a specific bonus computation.