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.
Part I of the First Schedule deals with cost accountants in practice. Parts II to IV widen the net: Part II to members who are employees, Part III to all members whether in practice or not, and Part IV to other misconduct such as a conviction for a minor offence or conduct that brings the profession into disrepute. The Act was called the Cost and Works Accountants Act, 1959 until 10 May 2022.
Part II: a member in service is guilty of misconduct if he pays a share of his emoluments to anyone or accepts commission or gratification from a lawyer, cost accountant or broker engaged by his employer. Part III: any member who gives false particulars to the Council, styles himself a fellow without being one, fails to supply information the Institute's bodies ask for, or gives false information in inviting work or responding to tenders. Part IV: being held guilty by a court of an offence punishable with imprisonment not exceeding six months, or bringing disrepute to the profession in the Council's opinion.
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 that 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". The 2022 substitution of that heading (section 72 of Act 12 of 2022) is enacted but not in force as per S.O. 2184(E) dated 10 May 2022. A later notification should be checked. Part I is explained in our articles on items (1) to (6) and items (7) to (11).
Part II: members in service
Opening words. A member of the Institute (other than a member in practice) is deemed guilty of professional misconduct, if he, being an employee of any company, firm or person:
- (1) pays or allows or agrees to pay, directly or indirectly, to any person any share in the emoluments of the employment undertaken by him; or
- (2) accepts or agrees to accept any part of fees, profit or gains from a lawyer, a cost accountant or broker engaged by such company, firm or person, or an agent or customer of such company, firm or person, by way of commission or gratification.
Part II protects the employer's relationship. A salaried cost controller cannot pass part of his pay to a third party who secured him the job, and cannot take a cut from a consultant, lawyer or broker whom his employer uses. Note that section 2(2), Explanation, says a whole-time salaried employee is not in practice; see our article on section 2.
Part III: members generally
A member of the Institute, whether in practice or not, is deemed guilty of professional misconduct if he:
| Item | Conduct |
|---|---|
| (1) | Not being a fellow, acts as a fellow of the Institute |
| (2) | Does not supply the information called for, or does not comply with the requirements asked for, by the Institute, the Council or any of its Committees, the Director (Discipline), the Board of Discipline, the Disciplinary Committee, the Quality Review Board or the Appellate Authority |
| (3) | While inviting professional work from another cost accountant, or responding to tenders or enquiries, or advertising through a write-up, or anything provided in items (6) and (7) of Part I, gives information knowing it to be false |
Item (1) protects the fellow class. Fellows use FCMA under section 5(5); see our article on sections 4 and 5. An associate who calls himself a fellow commits this misconduct.
Item (2) is a duty to cooperate. It lists seven bodies, from the Council to the Appellate Authority. A member who ignores a request for information from, say, the Director (Discipline) or the Quality Review Board is exposed. See our articles on the Disciplinary Directorate and the Quality Review Board.
Item (3) ties to Part I items (6) and (7): where a member is allowed to invite work from another cost accountant, respond to tenders or advertise by write-up, the information he gives must not be knowingly false. The permission in Part I is not a licence to mislead.
Part IV: other misconduct
A member of the Institute, whether in practice or not, is deemed guilty of "other misconduct" (the heading of Part IV) if:
- (1) he is held guilty by any civil or criminal court for an offence which is punishable with imprisonment for a term not exceeding six months; or
- (2) in the opinion of the Council he brings disrepute to the profession or the Institute as a result of his action, whether or not related to his professional work.
Two features of Part IV. First, item (1) is about the punishment prescribed for the offence ("punishable with imprisonment for a term not exceeding six months"), not the sentence actually given. The Second Schedule has the counterpart for offences punishable with imprisonment exceeding six months; see our article on the Second Schedule Part III. Second, item (2) turns on the Council's opinion and reaches conduct unrelated to professional work. The Act does not define disrepute.
Where the sections fit. Section 22 says "professional or other misconduct" includes acts and omissions in the Schedules; see our article on sections 21C, 21D and 22. Section 8(v) separately bars from the Register a person convicted of an offence involving moral turpitude and punishable with imprisonment; see our article on sections 6 to 8.
Which forum hears what
All the items in Parts II to IV are in the First Schedule, so in the in-force text they go to the Board of Discipline (reprimand, removal for up to three months, fine up to rupees one lakh); see our article on section 21A. If the same facts also fall under the Second Schedule, the case goes to the Disciplinary Committee, as section 21(3) in force provides.
A short example
Suresh Bhatt is a cost accountant employed as head of costing by a manufacturer. A broker engaged by the company to arrange its insurance offers him a gift in return for steering the business, and Suresh accepts. That is Part II item (2) misconduct. Separately, if he were held guilty by a court of an offence punishable with imprisonment not exceeding six months, Part IV item (1) would apply even though the offence had nothing to do with costing.
A member who has to respond to a notice under these Parts, or who needs to know how the Council may view conduct outside practice, can use legal dispute resolution support.
The same rule for chartered accountants
See Parts II to IV of the First Schedule to the Chartered Accountants Act, 1949. The cost accountants' text has its own wording, including the list of bodies in Part III item (2) and the "fellow" item.
Need help with a conduct complaint?
If you are an employed member, or any member, facing a complaint under Parts II to IV, our legal dispute resolution team can help you prepare a reply and read the item against the facts.
Key takeaways
- Part II covers members in service: sharing emoluments and taking commission or gratification.
- Part III covers all members: false particulars, styling oneself a fellow, not supplying information, false information in inviting work.
- Part IV covers other misconduct: minor-offence convictions and disrepute in the Council's opinion.
- The Second Schedule deals with offences punishable with imprisonment exceeding six months.
- The 2022 change to the Schedule's heading is not in force.
Read next
- First Schedule, Part I, items (1) to (6)
- Second Schedule, Part I, items (1) to (5)
- 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.