Section 2 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.
Section 2(2) of the Chartered Accountants Act, 1949 decides when a member of the Institute is "deemed to be in practice". A member is in practice when, alone or in partnership, and in consideration of remuneration received or to be received, he does one of four things: practises accountancy, offers audit, verification or certification services, renders professional help on accounting matters, or renders other services the Council treats as services of a chartered accountant in practice.
This article is 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). Later amendments and notifications should be checked.
A member is deemed to be in practice when, individually or in partnership with chartered accountants in practice, or with members of other recognised professions as may be prescribed, he does any of the four things in clauses (i) to (iv) for remuneration received or to be received. A salaried associate or fellow working for a chartered accountant or firm is deemed to be in practice only for the limited purpose of the training of articled assistants. The consequence of being in practice is that other provisions, such as the certificate of practice, apply to the member.
Why the definition matters
Many provisions of the Act turn on whether a member is "in practice". The rule that a member cannot practise without a certificate of practice is in section 6, and the Act sets different rules for members in practice and members in service in its two Schedules. Section 2(2) is the gateway to those rules. The section treats "in practice" as a status that depends on what a member does, not on what the member calls himself, and clause (ii) even reaches a member who merely holds himself out as an accountant. If you are unsure which side of the line a role falls on, our compliance advisory team can check it against the section.
The opening words: who and with whom
Section 2(2) begins: "A member of the Institute shall be deemed 'to be in practice', when individually or in partnership with chartered accountants in practice, or in partnership with members of such other recognised professions as may be prescribed, he, in consideration of remuneration received or to be received" does one of the four things listed.
Three parts of this are worth reading closely:
- Individually or in partnership. A sole practitioner and a partner of a firm are both covered.
- Partnership with chartered accountants in practice. The words "in practice" were inserted in 1959.
- Partnership with members of other recognised professions as may be prescribed. These words were inserted by the 2011 Amendment Act, in force from 1 February 2012. Which professions are recognised is left to the regulations made by the Council; the Act itself names none, and the regulations should be read for the list.
The element that ties the four clauses together is remuneration received or to be received. A member who does the same work without any remuneration, received or expected, is outside the wording as printed.
The four kinds of service
Clause (i): the practice of accountancy. The member engages himself in the practice of accountancy. The Act does not define the phrase further, so ordinary professional meaning applies.
Clause (ii): audit, verification and certification. The member offers to perform or performs services involving the auditing or verification of financial transactions, books, accounts or records, or the preparation, verification or certification of financial accounting and related statements, or holds himself out to the public as an accountant. Note that offering to perform is enough, and so is holding out as an accountant.
Clause (iii): accounting advice and presentation. The member renders professional services or assistance in or about matters of principle or detail relating to accounting procedure or the recording, presentation or certification of financial facts or data.
Clause (iv): other services in the opinion of the Council. The member renders such other services as, in the opinion of the Council, are or may be rendered by a chartered accountant in practice. The edition's footnote points to Appendix No. (2), where it prints the Council's resolution on this clause. That Appendix is a compilation by ICAI and is not part of the Act; the resolution should be read at source for current content.
The closing words say that "to be in practice", with its grammatical variations and cognate expressions, is construed accordingly. So "practises", "practising member" and "in practice" all take their meaning from this sub-section.
The Explanation: salaried members and articled assistants
The Explanation covers an associate or a fellow who is a salaried employee of a chartered accountant in practice, or of a firm of such chartered accountants, or of a firm consisting of one or more chartered accountants and members of any other professional body having prescribed qualifications. Such a person is deemed to be in practice, notwithstanding the employment, for one limited purpose only: the training of articled assistants. The words "training of articled assistants" replaced "training of articled clerks" in the 2006 Amendment Act, from 8 August 2006.
The Explanation does not make a salaried member a practitioner for every purpose. It exists so that such a member can be the person who trains an articled assistant. For all other purposes the member remains in service.
| Situation | Deemed to be in practice? |
|---|---|
| Sole practitioner who audits for fees | Yes, under clauses (i) to (iii) |
| Partner of a firm of chartered accountants | Yes, in partnership with chartered accountants in practice |
| Partner in a firm with members of a prescribed recognised profession | Yes, if the profession is prescribed |
| Associate or fellow employed on salary by a CA firm | Only for training articled assistants |
| Member employed in a company and doing no outside work | Not by reason of section 2(2) as printed |
A worked example
Meera, a fellow, works for a CA firm on a salary. She does not sign reports. Under the Explanation she is deemed to be in practice only to train an articled assistant in the firm. When she later starts her own proprietorship, offers to audit accounts and receives fees, she is in practice under clause (ii) and must hold a certificate of practice as the Act requires. How to obtain it is explained in section 6.
How this links to audits and discipline
A member who is in practice is the person the audit and certification provisions are aimed at. For the way discipline attaches to tax audit work, see professional misconduct in tax audit. For the way the Council makes regulations on practice, see section 30. The parallel rule for cost accountants is in section 2 of the Cost Accountants Act, 1959.
Need help working out whether you are in practice?
A short question about your role, your fees and your arrangements often decides whether section 2(2) applies. If you are setting up a practice or reviewing a service line, our compliance advisory team can look at the facts against the section and the regulations.
Key takeaways
- A member is deemed to be in practice if, for remuneration received or to be received, he does any of the four things in clauses (i) to (iv).
- The partnership may be with chartered accountants in practice or with members of other recognised professions as may be prescribed.
- Offering to perform audit services, or holding out as an accountant, is enough under clause (ii).
- Clause (iv) turns on the opinion of the Council; the edition prints the related resolution in Appendix No. (2).
- A salaried associate or fellow is deemed to be in practice only for training articled assistants.
- The meaning of the status feeds into section 6 and the two Schedules.
Read next
- Section 6 of the Chartered Accountants Act, 1949: certificate of practice
- Section 2(1) of the Chartered Accountants Act, 1949: definitions
- Professional misconduct in tax audit and the TAQRB
- Section 30 of the Chartered Accountants Act, 1949: the Council's power to make regulations
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.