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 is the dictionary of the Act. Sub-section (1) defines the terms used throughout, and sub-section (2) says when a member of the Institute is "in practice", which decides whether a certificate of practice is needed and which services only a practising member may offer. The statute was called the Cost and Works Accountants Act, 1959 until 10 May 2022.
Section 2(1) defines terms such as Council, firm, partner, prescribed, specified and Register, and the 2022 Amendment Act added definitions such as Board of Discipline, Disciplinary Committee and Standing Committee. Under section 2(2) a member is in practice when, for remuneration, he practises cost accountancy, offers costing or pricing services, certifies or audits cost accounting statements, or renders related services. A whole-time salaried employee is not in practice.
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. Section 40 of that Act, which amends section 2(1), is in force. Later amendments and notifications should be checked.
Section 2(1): the definitions
The definitions below are as amended. Items marked "2022" were added or substituted by Act 12 of 2022.
| Term | Meaning in the Act |
|---|---|
| Associate | An associate member of the Institute |
| Authority | The Appellate Authority referred to in section 22A |
| Board | The Quality Review Board constituted under section 29A |
| Board of Discipline (2022) | The Board of Discipline constituted under section 21A(1) |
| Companies Act (2022) | The Companies Act, 2013 or any other previous company law as defined in section 2(67) of that Act |
| Cost accountant | A person who is a member of the Institute |
| Council (2022 wording) | The Council of the Institute constituted under section 9 |
| Director (Discipline) (2022) | The Director (Discipline) referred to in section 21, including a Joint Director (Discipline) |
| Disciplinary Committee (2022) | The Disciplinary Committee constituted under section 21B(1) |
| Disciplinary Directorate (2022) | The Disciplinary Directorate established under section 21(1) |
| Dissolved company | The Institute of Cost and Works Accountants registered under the Companies Act (the figures "1956" were omitted in 2022) |
| Fellow (2022) | A fellow member of the Institute |
| Institute | The Institute of Cost Accountants of India constituted under the Act |
| Notification (2022) | A notification published in the Official Gazette; "notify" is construed accordingly |
| Prescribed | Prescribed by regulations made under the Act |
| Specified | Specified by rules made by the Central Government under the Act |
| Standing Committee (2022) | A Standing Committee constituted under section 17(1) |
| Tribunal | A Tribunal established under section 10B(1) |
| Year | 1 April to 31 March of the next year |
Three groups of definitions need a closer look.
Firm, partner and partnership. "Firm" has the meaning in section 4 of the Indian Partnership Act, 1932 and includes a limited liability partnership (as defined in the Limited Liability Partnership Act, 2008) and a sole proprietorship registered with the Institute. "Partner" takes its meaning from the Partnership Act or the LLP Act, as the case may be. "Partnership" means a partnership under the Partnership Act, or an LLP which has no company as its partner. A "sole proprietorship" means an individual who practises cost accountancy or offers the services in clauses (ii) to (iv) of section 2(2). See our guides on the Indian Partnership Act, 1932 and the LLP Act, 2008.
Prescribed and specified. "Prescribed" points to regulations made by the Council; "specified" points to rules made by the Central Government. When a section says a thing is "prescribed", the detail is in the regulations, and when it says "specified", the detail is in the rules. This series does not set out either.
Register. As substituted in 2022, "Register" means the Register of members maintained under section 19 or the Register of firms maintained under section 20B, as the case may be. Section 20B sits in Chapter IVA, which is enacted but not yet in force. Until it is brought into force, the only Register actually operating under the Act is the Register of members. Our article on sections 20A to 20D explains that Chapter.
A flag on cross-references. The new definitions of the Disciplinary Directorate and Director (Discipline) point to section 21, and the Board of Discipline and Disciplinary Committee to sections 21A and 21B. The 2022 text of those sections is enacted but not yet in force; the earlier text remains the law. The definitions are in force, but you should read them with the earlier sections until a commencement notification says otherwise.
The old company. The "dissolved company" is the company that preceded the Institute; see sections 30 to 32. The definition refers to the Companies Act as printed, so check current company law.
Section 2(2): when is a member "in practice"?
Subject to the rest of the Act, a member of the Institute is deemed to be "in practice" when, individually or in partnership with one or more members of the Institute in practice, or in partnership with members of such other recognised professions as may be prescribed, he does any of the following in consideration of remuneration received or to be received:
- Clause (i): engages himself in the practice of cost accountancy;
- Clause (ii): offers to perform or performs services involving the costing or pricing of goods or services, or the preparation, verification or certification or auditing of cost accounting and related statements, or holds himself out to the public as a cost accountant in practice;
- Clause (iii): renders professional services or assistance in or about matters of principle or detail relating to cost accounting procedure, or the recording, presentation or certification of costing facts or data; or
- Clause (iv): renders such other services as, in the opinion of the Council, are or may be rendered by a cost accountant in practice.
The words "to be in practice" and their grammatical variations and cognate expressions are construed accordingly.
The phrase "or in partnership with members of such other recognised professions as may be prescribed" was inserted by the 2011 Amendment Act. Which professions are recognised is left to the regulations.
The Explanation: salaried employees
A member who is a whole-time salaried employee of any person is not deemed to be in practice within section 2(2). So a cost accountant who is the head of costing at a manufacturing company and draws a salary is not "in practice", even though her work is costing work.
Why it matters
Section 6(1) says no member may practise, in India or elsewhere, without a certificate of practice. The test for "practice" is therefore section 2(2). Our article on sections 6 to 8 explains the certificate.
Two examples
Example 1. Meena Rao, a member of the Institute, receives fees from three clients for preparing and certifying their product cost statements. She is in practice under clause (ii), whatever she calls herself, and needs a certificate of practice.
Example 2. Arvind Kulkarni, also a member, is employed whole-time on a monthly salary as cost controller of a plant. Under the Explanation he is not in practice. The Explanation does not discuss side work for fees, so a member in doubt should take advice.
A cost accountant who wants to check whether an activity amounts to practice, and how that affects a salaried role, can take guidance through compliance advisory.
The same rule for chartered accountants
For the chartered accountants' definitions see Section 2(1) of the Chartered Accountants Act, 1949, and for the practice test see Section 2(2). The cost accountants' text differs in its subject matter: it speaks of cost accounting, costing and pricing services and cost statements.
Need help with practice questions?
If you are unsure whether your work counts as practice, or how a firm, LLP or sole proprietorship should be described under the Act, our compliance advisory team can walk through the definitions against your facts.
Key takeaways
- Section 2(1) is the dictionary; the 2022 Act added new terms and changed several others.
- "Prescribed" means by regulations of the Council; "specified" means by rules of the Central Government.
- "Register" now covers the Register of members and, once Chapter IVA is in force, the Register of firms.
- A member is in practice when he does the listed work for remuneration, alone or in partnership.
- A whole-time salaried employee is not in practice.
Read next
- Sections 1 and 3: short title, extent and the Institute
- Sections 6 to 8: certificate of practice, designation and disabilities
- Sections 20A to 20D: registration and Register of firms
- Section 148 of the Companies Act, 2013: cost audit
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.