Accountant Definition Debated in Income-Tax Bill 2025: During the Select Committee’s examination of the New Income-Tax Bill, 2025, a key point of contention arose regarding the definition of “accountant” in Clause 2(1) of the Bill. Professional bodies such as the Institute of Cost Accountants of India (ICMAI) and the Institute of Company Secretaries of India (ICSI) advocated for their members to be recognized as “tax accountants” under the new legislation, aligning their roles with those of Chartered Accountants (CAs). The Ministry of Corporate Affairs (MCA), when consulted, clarified the distinct statutory roles of CAs, Cost Accountants (CMAs), and Company Secretaries (CSs) under the Companies Act, noting that only CAs are authorized for statutory audits, CMAs for cost audits, and CSs for secretarial compliance. The MCA deferred to the Department of Revenue on broadening the definition, emphasizing that such a decision should be based on the specific competencies required for tax functions. The Ministry of Finance, in its written and oral submissions, maintained that the definition of “accountant” has historically been restricted to Chartered Accountants since the original 1961 Act. They argued that the core functions mandated by the Income-Tax Act, particularly audit and financial transactions, are explicitly covered under the Chartered Accountants Act, 1949, but not within the scope defined for Cost Accountants under the Cost and Works Accountants Act, 1959. The Ministry asserted that extending such functions through the Income-Tax Act would be difficult without corresponding changes in the respective parent legislations governing these professions, thereby limiting tax audit functions to Chartered Accountants.
Extract from Report of Select Committee on Income-Tax Bill, 2025
2.5 Examination by the Committee:
2.5.1 Sub-Clause 2(1)
Representatives of Ministry of Finance on the definition of the accountant as given in clause 2(1) submitted to the Committee:
2.5.1.2 During the Committee’s deliberations with the Ministry of Corporate Affairs (MCA), attention was towards the representations from the professional bodies such as ICMAI, ICSI etc., seeking recognition as tax accountants under the new legislation. It was noted that while these requests had been raised during the drafting process, they were not accepted by the Department, and much of the subsequent interaction with these bodies centered on this concern. Accordingly, the Chairperson requested the views of the Ministry of Corporate Affairs (MCA) was sought on this issue during the meeting. In response, the MCA clarified the distinct statutory roles assigned to Chartered Accountants (CAs), Cost Accountants (CMAs), and Company Secretaries (CSs) under the Companies Act—where only CAs are authorized to conduct statutory audits, CMAs undertake cost audits, and CSs perform secretarial compliance audits. While certain non-statutory functions such as internal audit may be conducted by any of these professionals or other board-appointed experts, the MCA emphasized that the specific responsibilities envisaged for “accountants” under the Income-tax Bill are best understood by the Department of Revenue. Therefore, the MCA deferred to the Department’s judgment on whether to broaden the definition to include CMAs and CSs, noting that such a decision must be guided by the competencies required for tax-related functions.
2.5.1.3 On the stakeholder’s suggestion regarding the definition of “Accountant”, Ministry of Finance in a written reply submitted as under:
“The IT Bill, 2025 has been drafted keeping in view the mandate of simplification of provisions of the Income-tax Act, 1961. This approach is also reflected in the Statement of objects and reasons presented by the Hon’ble Finance Minister while introducing the IT Bill, 2025 in the Lok Sabha on the 13th of February, 2025. Accordingly, the existing provisions of the IT Act, 1961 have been simplified and presented with a view to –
(i) making the Act concise, lucid, easy to read and understand;
(ii) making the language clear and direct in text so that it is simple to understand for the taxpayer and the tax administration, leading to tax certainty and reduced litigation;
(iii) consolidating the provisions lying in different parts of the IT Act, 1961;
(iv) using tabular structures and formulae wherever feasible;
(v) aligning with the existing provisions as well as existing interpretations and implementation practices so as to bring clarity on issues.
The suggestion made by the stakeholder is in the nature of policy change which is beyond the scope of the objectives of the IT Bill, 2025.”
2.5.1.4 Representatives of the Ministry of Finance submitted that the definition restricting “accountant” to Chartered Accountant was in the original 1961 Act from the beginning, referring to a footnote and deposed as under:
“Sir, in the original Act, the reference to 2015, this definition was right from beginning. You see the foot note. Footnote gives the earlier explanation. The footnote says accountant means chartered accountant within the meaning of the chartered accountants act 1949.”
2.5.1.5 Further elaborating on the issue during the meeting, the representatives of Ministry of Finance substantiated their stance further as given below:
“Regarding this Cost Accountant and Chartered Accountant, the suggestion has come relating to various clauses of the Bill. So, everywhere, the Cost Accountants are saying that in this Clause also, we should be enabled to do the same things which a Chartered Accountant is enabled. So, our initial response to this is that functions of a Cost Accountant are regulated by the Cost and Works Accountants Act and in comparison, the functions of a Chartered Accountant are regulated by the Chartered Accountants Act, 1949. So, they have given the details. Both the Acts have mentioned in detail as to what are the functions a Cost Accountant can do and what are the functions a Chartered Accountant can do.
So, our position is that parent legislation of the Cost Accountants and Chartered Accountants is different and is laid on specific functions. So, the functions which are mandated in the Income-Tax Act are relating to audit and accounting and they do not find a place in the domain of work which is specified for the Cost Accountants. So, audit of books and financial transactions, which is our principal work, is specifically included in the Chartered Accountants Act. The parity, which they are seeking, is not available in the principal legislation itself and we have to map our functions with the functions which they can do in their respective Acts. It may be a difficult proposition.
I will just bring and take forward from where my colleague pointed out on the legal issue. There are two parts to it. One is the training or capability and the second is the legal window available to do something. Now, since under these respective Acts, they are authorized to certify and their signs carry a certain legal weight. That authority comes from the respective Act. For example, the Cost Accountants Act says that member will be considered to be in practice if he engages in the practice of Cost Accountancy; offers to perform services involving costing or pricing of goods or services or the preparation, verification or certification or auditing of cost accounting and related statements; 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; and renders such other services as which may be rendered by a cost accountant in practice.
So, the issue which will come in here would be that in the Income Tax law, to say that certain types of certifications will be acceptable if it is signed by someone who has qualification, may be legally to be evaluated with reference to the respective Acts which give scope for that person to do something. So, probably, this issue may require some inputs from the Ministry of Corporate Affairs since they handle all the three Acts, and the inter se dynamics of thethree types of professions and the way the legal structures have been worked out could be thought about that…
….. in addition to this, any infringement or any gap in the duties that the Chartered Accountants or professionals actually perform, make them liable for consequences under their Act also. So, unless and until their Act specifically permits such sort of a certification, it would be difficult to actually extend it through an Income-Tax Act.
2.5.1.6 Ministry of Finance further elaborated their stance on the parity issues of Cost Accounts vs Chartered Accounts and submitted the following written reply to the Committee
“The functions of a cost account are regulated and governed by the Cost and Works Accountants Act 1959. The Act clearly lays down that a member of the Institute shall be in practice if he :-
“(i) engages himself in the practice of [cost accountancy]; or
(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]; or
(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
(iv) renders such other services as, in the opinion of the Council, are or may be rendered by a cost accountant in practice,”
By comparison a chartered accountant under the Chartered Accountant Act 1949 lays down that member shall be in practice if :-
“(i) engages himself in the practice of accountancy; or
(ii) 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; or
(iii) 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; or
(iv) renders such other services as, in the opinion of the Council, are or may be rendered by a chartered accountant [in practice];”
It is therefore clear that the parent legislations of cost accountants and chartered accountants are different and lay down specific functions. The functions mandated in the Income-tax Act related to audit and accounting, do not find a place in the domain of work specified for cost accountants in their Act. Whereas audit of books and financial transactions is specifically included in Chartered accountant’s Act.
Therefore the basic issue that a cost accountant can be or should be considered equivalent for the purposes of tax audit does not hold merit. It is principally limited by the respective Acts and till such demarcations exist the audit related function under the Income-tax Act have to be handled by Chartered Accountants only.
in case of cost accountants act in the scope it is included auditing of cost accounts records means these are comes from accounts books and same also audited by the cost auditor. so cost auditor also eligible for inclusion in the accountant definition of income tax. As per this act previous upa govt also included to cost accountant in the definition of accountant on the recommendation of standing committee report headed by yashwanth Sinha who was also MP of BJP at this time in 2011