Allocable Surplus [Section 2 (4)]: “Allocable surplus” means:

 In relation to an employer, being a company (other than a banking company) which has
not made the arrangements prescribed under the Income Tax Act for the declaration and
payment within India of the dividends payable out of its profits in accordance with the
provisions of Section 194 of that Act, 67% of the available surplus in an accounting year.
 In any other case, 60% of such available surplus. [Section 2(4)].
Available Surplus [Section 2(6)]: “Available surplus” means the available surplus computed as
per Section 5. According to Section 5, the available surplus in respect of any accounting year is
the gross profit for that year after deducting therefrom the sum referred to in Section 6 and
adding certain amounts.
As per Section 6 of the Payment of Bonus Act, 1965, the following deductions are to be
made from the ‘gross profit’ :
 Amount of depreciation admissible.
 Amount of the development rebate or the development allowance or the investment
allowance admissible as deductions from the income.
 Direct Tax payable as per Section 7.
 Sums which have been specified in the Third Schedule of the Act.
Besides making the above deductions from the gross profit, the difference between the
following amounts has to be added to the gross profit :
 Direct Tax computed according to Section 7 in respect of the gross profit for the
immediately preceding accounting year and
 Direct Tax computed according to Section 7 in respect of gross profit which is reduced
by the amount of bonus, for the immediately preceding accounting year.
Thus, Available surplus = Gross Profit — Certain Deductions Amounts + Certain
Distinction between Allocable Surplus and Available Surplus : The term ‘allocable’ surplus
is defined in Section 2 (4) of the payment of Bonus Act, 1965. It is the workers share in the
available surplus. Available surplus means the available surplus computed under Section 5 of the
Act.
According to Section 5, the available surplus in respect of any accounting year shall be the gross
profit for that year after deducting from it certain prior changes as mentioned in Section 6.