Disposal of net surplus

(1) A society earning profit, shall calculate the net profits by deducting from the gross profits for the financial year, all accrued interest which is overdue for more than six months, establishment charges, interest payable on loan and deposits, audit fees, rebate, discount, bonus or patronage or any other incentive, working expenses including repairs, rent, taxes, depreciation and funds provided for promotion of objectives and after providing for or writing off bad debts and losses not adjusted against any funds created out of profit. (2) The society shall prepare its Annual Financial Statement and arrive at its surplus or deficit. If provided in it’s bye-laws, the society shall, out of it’s net surplus arising from its business in any year, make deferred payment to its members as patronage refund in proportion to the contribution of the members to such business an amount not less than 20% and not exceeding 50% of such surplus. The balance of net surplus shall be appropriated in the following manner:- (a) At least 25% shall be transferred to statutory reserve fund; (b) Not exceeding 20% shall be transferred to a deficit fund for meeting unforeseen deficits; (c) Not less than 2% with a maximum limit of Rs. 50,000 towards contribution to the Co-operative Education Fund which shall be transferred to the Co-operative Education fund as maintained by the Registrar of Co-operative Societies; (d) Upto 5% to be transferred to a common benefit fund or common welfare fund whose purpose is approved by the general body; (e) Upto 5% towards contribution for any purpose connected with the development of the co-operative movement; (f) Not exceeding 25% of paid up share capital towards payment of dividend to members; (g) The balance of surplus may be appropriated towards such other funds and reserves as may be approved by the board and confirmed by the general body. Provided that the co-operative banks and urban co-operative credit societies may, instead of making deferred payment to their members as patronage refund, issue bonus shares as prescribed: Provided further that if any society has not made patronage refund as specified under this section then, the entire amount of net surplus shall be appropriated in the proportion as mentioned in clauses (a) to (g) above.