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 the less serious professional misconduct of cost accountants in practice, the matters heard by the Board of Discipline. Part I, items (1) to (6), deals with who may practise in a member's name, whom he may share fees with, whom he may partner with, how he may secure work and what counts as soliciting. The Act was called the Cost and Works Accountants Act, 1959 until 10 May 2022.
A cost accountant in practice is guilty of professional misconduct if he lets a person practise in his name (unless that person is a cost accountant in practice who is his partner or employee), shares fees or profits with a non-member (subject to exceptions), accepts a share of the profits of a non-member's work, partners with an unqualified person, secures work through unauthorised means, or solicits clients. Under the in-force text these are heard by the Board of Discipline; the 2022 change to the Schedule's heading is enacted but not in force.
How this article reads the Act
This article follows the Act as printed by the Institute (as amended in 2011), read with the 2022 Amendment Act to the extent brought into force by S.O. 2184(E) dated 10 May 2022. The First Schedule printed by the Institute is the version substituted in 2006; the wording the 2006 Act replaced is not law and is not used here. Later amendments and notifications should be checked.
The commencement trap. The heading of the First Schedule in force reads "See sections 21(3), 21A(3) and 22". Section 72 of the 2022 Act would substitute "21(6), 21A (5) and (6), 21B (5) and (6)". That change is enacted but not brought into force as per S.O. 2184(E) dated 10 May 2022. The heading references in force are the earlier ones. A later notification should be checked. For the forums, see our articles on section 21 and section 21A.
How the First Schedule is organised
| Part | Subject | Covered in |
|---|---|---|
| Part I | Misconduct of cost accountants in practice (eleven items) | This article (items 1 to 6) and items 7 to 11 |
| Part II | Members in service | Parts II to IV |
| Part III | Members generally | Same |
| Part IV | Other misconduct | Same |
Part I opens: "A cost accountant in practice shall be deemed to be guilty of professional misconduct, if he-".
Item (1): letting others practise in one's name
He allows any person to practise in his name as a cost accountant, unless that person is also a cost accountant in practice and is in partnership with or employed by him.
So a practising member may allow only a fellow practising cost accountant who is his partner or employee to practise in his name. An unqualified assistant, a retired member without a certificate, or a friend cannot.
Item (2): sharing fees or profits
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, 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.
Explanation: "partner" includes a person residing outside India with whom a cost accountant in practice has entered into a partnership that is not in contravention of item (4).
The prescribed qualifications are in the regulations and are not set out here. Fee-sharing with anyone outside the list is misconduct, whether the payment is made directly or through someone else.
Item (3): taking a share of a non-member's profits
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 such professional body or other person having qualifications as referred to in item (2).
Items (2) and (3) are the two sides of fee-sharing: (2) covers paying out to the wrong person, and (3) covers receiving from the wrong person.
Item (4): partnerships
He enters into partnership, in or outside India, with any person other than:
- a cost 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 section 4(1)(iv), or whose qualifications are recognised by the Central Government or the Council for the purpose of permitting such partnerships.
A firm that wants to add a partner from another profession should check the prescribed qualifications before signing. See our guide on the Indian Partnership Act, 1932 and, for an LLP, the LLP Act, 2008.
Item (5): securing professional business
He secures, either through the services of a person who is not an employee of such cost accountant or who is not his partner, or by means which are not open to a cost accountant, any professional business.
Proviso: nothing in the item prohibits any arrangement permitted under items (2), (3) and (4).
This closes the back door. A member cannot use an outside agent or a means unavailable to a cost accountant to get work, unless the arrangement is one that items (2) to (4) permit.
Item (6): soliciting
He solicits clients or professional work, either directly or indirectly, by circular, advertisement, personal communication or interview or by any other means.
Proviso: nothing prohibits:
- (i) any cost accountant from applying, requesting, inviting or securing professional work from another cost accountant in practice; or
- (ii) a member from responding to tenders or enquiries issued by various users of professional services or organisations from time to time and securing professional work as a consequence.
Advertising is dealt with in item (7), where the Schedule allows a member in practice to advertise through a write-up subject to the Council's guidelines; see our article on items (7) to (11).
Summary table
| Item | The member must not | Exceptions in the text |
|---|---|---|
| (1) | Allow anyone to practise in his name | A cost accountant in practice who is his partner or employee |
| (2) | Pay or share fees or profits | Members, partners, retired or deceased partners' representatives, members of other professional bodies, prescribed persons |
| (3) | Accept a share of a non-member's profits | Arrangements with the persons in item (2) |
| (4) | Partner with an unqualified person | Cost accountants in practice, prescribed professional-body members, qualifying residents abroad |
| (5) | Secure work through outsiders or improper means | Arrangements permitted by items (2), (3) and (4) |
| (6) | Solicit clients or work | Approaching another cost accountant in practice; responding to tenders and enquiries |
What follows a finding
Misconduct in the First Schedule is heard by the Board of Discipline, which may reprimand, remove the name from the Register of members for up to three months, or fine up to rupees one lakh (the in-force text); see our article on section 21A. The member may appeal to the Appellate Authority; see sections 22A to 22E.
A short example
Anand Rao, a cost accountant in practice, pays one-fifth of his fee to an unregistered consultant who brings him a client, and an unqualified friend uses Anand's name on his own cost certificates for other clients. The first falls under item (2) and the second under item (1). Both are First Schedule misconduct for Anand.
A practice that wants its partnership deed to comply with items (2) to (4), including how fees are shared and who may be a partner, can use partnership deed drafting support.
The same rule for chartered accountants
See First Schedule Part I items 1 to 4 of the Chartered Accountants Act, 1949 and items 5 to 7. The numbering and the wording of the cost accountants' items are those printed in this Act.
Need help with partnership and fee-sharing terms?
If your practice has partners from other professions, referral arrangements or fee-sharing terms, our partnership deed drafting team can help you draft the deed with items (1) to (6) in view.
Key takeaways
- Only a cost accountant in practice who is a partner or employee may practise in a member's name.
- Fees may be shared only with the listed persons; accepting a share of a non-member's profits is also misconduct.
- A partnership must be with a cost accountant in practice or a prescribed professional-body member.
- Work may not be secured through outsiders or improper means, and clients may not be solicited, with the stated exceptions.
- The 2022 change to the Schedule's heading is not in force.
Read next
- First Schedule, Part I, items (7) to (11)
- First Schedule, Parts II to IV
- Section 21A: the Board of Discipline
Disclaimer: Based on the Cost and Works Accountants Act, 1959 (now the Cost Accountants Act, 1959) as printed by the Institute of Cost Accountants of India (as amended in 2011), read with the Chartered Accountants, the Cost and Works Accountants and the Company Secretaries (Amendment) Act, 2022 to the extent brought into force by S.O. 2184(E) dated 10 May 2022, as consulted on 3 October 2026. Regulations, rules, later amendments and commencement notifications should be checked. This article is general information, not legal advice; check the official text before acting.