First Schedule 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.
The First Schedule lists acts that make a chartered accountant in practice "guilty of professional misconduct". Items (1) to (4) of Part I deal with who may practise in a member's name, with whom fees and profits may be shared and with whom a partnership may be formed. They go to the Board of Discipline. This article follows the text as per the Act as printed in the ICAI edition of 2022 (amended up to the Chartered Accountants, the Cost and Works Accountants and the Company Secretaries (Amendment) Act, 2022).
Part I opens: a chartered accountant in practice shall be deemed to be guilty of professional misconduct if he does any of the listed acts. Items (1) to (4) cover letting a person practise in his name, paying or taking a share of fees or profits outside the permitted circle, and entering a partnership with anyone other than a chartered accountant in practice or a permitted professional. Under section 21(3) as in force, the Director (Discipline) places First Schedule matters before the Board of Discipline.
How the First Schedule works
Section 22 deems every act or omission in the Schedules to be "professional or other misconduct" (see our article on sections 21C, 21D and 22). The First Schedule has four Parts:
| Part | Who | Label |
|---|---|---|
| I | Chartered accountants in practice | Professional misconduct |
| II | Members in service | Professional misconduct |
| III | Members generally | Professional misconduct |
| IV | Members generally | Other misconduct |
If you run a firm or are drafting a partnership deed, items (1) to (4) are part of the checklist. Our partnership deed drafting service can help you align the deed with them.
The heading and the commencement trap. The Schedule's heading cross-refers to the sections under which it operates. The ICAI 2022 edition prints the 2022 reference ("21(6), 21A(5) and (6), 21B(5) and (6)") with a footnote that the change is not yet in force; per S.O. 2184(E) dated 10 May 2022 the heading reference in force is "21(3), 21A(3)". In plain terms, the in-force route is: under section 21(3), where the Director (Discipline) forms the opinion that a member is guilty of misconduct mentioned in the First Schedule, he places the matter before the Board of Discipline. Under section 21A(3) the Board, after giving the member an opportunity of being heard, may reprimand him, remove his name from the Register for up to three months, or impose a fine up to one lakh rupees. Our articles on section 21 and section 21A explain the route, including the 2022 version that is enacted but not yet in force. A later commencement notification should be checked.
The opening words of Part I
"A chartered accountant in practice shall be deemed to be guilty of professional misconduct, if he -". The Part applies to a member in practice. "Deemed" means that, once the act is established, the label of professional misconduct attaches. Part I does not apply to a member who is not in practice, who is dealt with in Parts II, III and IV.
Item (1): letting a person practise in your name
A member is guilty if he allows any person to practise in his name as a chartered accountant unless that person is also a chartered accountant in practice and is in partnership with, or employed by, him.
The test has two limbs: the person must be (a) a chartered accountant in practice, and (b) either a partner or an employee. A non-member, an unqualified assistant or a member without a certificate of practice cannot be allowed to practise in his name. Section 26 separately makes it an offence for a non-member to sign for a practising member (see section 26).
Item (2): paying or allowing a share in fees or profits
A member is guilty if he pays or allows, or agrees to pay or allow, directly or indirectly, any share, commission or brokerage in the fees or profits of his professional business, to any person other than:
- a member of the Institute;
- a partner, or a retired partner, or the legal representative of a deceased partner;
- a member of any other professional body; or
- such other persons having such qualifications as may be prescribed,
"for the purpose of rendering such professional services from time to time in or outside India".
The permitted circle is therefore the members, the firm's partners (current, retired or the estate of a deceased one), members of other professional bodies, and persons with qualifications the regulations prescribe. "Prescribed" means prescribed by regulations (section 2(1)(f)); the Act does not list the qualifications.
Explanation. In this item, "partner" includes a person residing outside India with whom a chartered accountant in practice has entered into a partnership which is not in contravention of item (4).
Item (3): accepting a part of the profits of a non-member's work
A member is guilty if he accepts or agrees to accept any part of the profits of the professional work of a person who is not a member of the Institute.
Proviso. Nothing in the item prohibits a member from entering into profit sharing or other similar arrangements, including receiving any share, commission or brokerage in the fees, with a member of the professional body, or other person having qualifications, referred to in item (2).
So item (2) covers what a member gives out, and item (3) covers what he takes in. The proviso lets the item (3) arrangement stand where the other party is within the item (2) circle.
Item (4): partnership with the wrong person
A member is guilty if he enters into partnership, in or outside India, with any person other than:
- a chartered accountant in practice; or
- such other person who is a member of any other professional body having such qualifications as may be prescribed, including a resident who, but for his residence abroad, would be entitled to be registered as a member under clause (v) of section 4(1), or whose qualifications are recognised by the Central Government or the Council for the purpose of permitting such partnerships.
A partnership with an unqualified person, or a company, is outside the permitted list.
| Item | What it stops | Permitted exceptions in the text |
|---|---|---|
| (1) | Allowing a person to practise in one's name | A chartered accountant in practice who is a partner or employee |
| (2) | Sharing fees or profits outside the circle | Members, partners, retired partners, legal representative of a deceased partner, other professional bodies, prescribed persons |
| (3) | Taking a part of a non-member's profits | The proviso: arrangements with the item (2) circle |
| (4) | Partnership outside the circle | Chartered accountants in practice, prescribed members of other bodies, the abroad-resident category, recognised qualifications |
A worked example
CA Deepak Rao has an assistant, Suresh, who has not qualified. Deepak lets Suresh sign client letters as "Suresh, Chartered Accountant, for Deepak Rao & Associates". Item (1) is in play, because Suresh is neither a chartered accountant in practice nor a partner or employee within the exception. Later Deepak pays a referral commission to a marketing agent who is not a member or partner. Item (2) is in play.
Where the other First Schedule items are explained
Items (5) to (7) are in our article on securing work, soliciting and advertising. Item (8) is explained in our post on communicating with the outgoing auditor, item (10) on contingent fees and item (11) on another business or occupation. Items (9) and (12) are in the article on auditor appointment checks and signing by non-members.
Need help with a partnership deed or fee-sharing arrangement?
A partnership with the wrong person or a fee arrangement outside the permitted circle can be a misconduct item even if the deed is signed. Our partnership deed drafting team can draft or review the deed with these items in view.
Key takeaways
- Part I applies to a chartered accountant in practice, who is "deemed" guilty once an item is made out.
- Item (1): only a chartered accountant in practice who is a partner or employee may practise in your name.
- Items (2) and (3): fees and profits may be shared only with the permitted circle; the item (3) proviso links back to item (2).
- Item (4): partnership only with a chartered accountant in practice or a permitted professional.
Read next
- First Schedule Part I, items (5) to (7): securing work, soliciting and advertising
- Sections 21C, 21D and 22: misconduct defined
- Section 21A: the Board of Discipline
- Partnership Act, 1932: a guide
Disclaimer: Based on the Chartered Accountants Act, 1949 as printed in the ICAI edition of 2022 (amended up to Act 12 of 2022), read with S.O. 2184(E) dated 10 May 2022, which brought only part of the 2022 amendments into force, as consulted on 3 October 2026. Regulations, rules, Council guidelines, later amendments and commencement notifications should be checked. This article is general information, not legal advice; check the official text before acting.