A client offers a practising Chartered Accountant "10% of whatever we save" or "a fee only if the appeal succeeds". The commercial logic is easy to see. The professional answer is usually no. The Chartered Accountants Act, 1949 treats result-linked fees as professional misconduct unless the Chartered Accountants Regulations, 1988 permit them, and those permissions are narrow.
This guide explains the rule, the exceptions written into Regulation 192, how to test a proposed fee, and where the Code of Ethics adds a separate check.
The rule: clause (10) and Regulation 192
Clause (10) of Part I of the First Schedule to the Chartered Accountants Act, 1949 makes it professional misconduct for a Chartered Accountant in practice to charge fees based on a percentage of profits or contingent upon the findings or results of professional work, except where the Regulations permit it.
Regulation 192 of the Chartered Accountants Regulations, 1988 repeats the restriction: no Chartered Accountant in practice shall charge or offer to charge, accept or offer to accept, in respect of any professional work, fees which are based on a percentage of profits, or which are contingent upon the findings or results of such work. It then lists the cases where a percentage basis is allowed.
The three exceptions written into Regulation 192
| Role | Permitted fee basis |
|---|---|
| Receiver or liquidator | A percentage of the realisation or disbursement of the assets |
| Auditor of a co-operative society | A percentage of the paid-up capital, the working capital, or the gross or net income or profits |
| Valuer for the purposes of direct taxes and duties | A percentage of the value of the property valued |
These three are role-specific. A percentage fee is permitted because the practitioner is acting in that capacity, not because the work looks similar. A CA doing a valuation for a share purchase negotiation is not acting as a valuer for direct taxes and duties merely because the same valuation is later used in a tax filing.
Do not assume that any other service qualifies. If someone claims that a category beyond these three is permitted, find the current ICAI text that permits it, check that it covers this service and this capacity, and keep a copy of the paragraph relied on in the file. If no such text can be found, treat the fee as not permitted.
The Code of Ethics now in force
ICAI's announcement of the revised Code of Ethics (13th edition), dated 30 May 2026, states that the Code applies from 1 April 2026, with one provision given a different effective date. It is issued in three volumes: Volume I covering domestic provisions, Volume II converged with the IESBA Code of Ethics 2024, and Volume III containing ethics standards for sustainability assurance.
This matters for fees in two ways. Volume I carries the domestic provisions that apply alongside the Act and the Regulations. Volume II carries the independence framework, which can prohibit a fee arrangement for an audit or other assurance client even where Regulation 192 itself would allow the fee basis. Passing one test does not mean passing the other.
A two-stage test for any proposed fee
- Classify the trigger. Write down exactly what makes the fee go up, down or disappear. If the amount changes with profit, tax saved, finance raised, the result of an appeal, or the conclusion of the work, it is a percentage or contingent fee, whatever the engagement letter calls it.
- Map it to a permission. Identify the exact Regulation 192 exception, or other current ICAI text, that covers this service and this capacity.
- Check the client relationship. If the client is an audit or assurance client, apply the independence provisions separately.
- Check other laws. Where the role is also governed by another statute or regulator, check that regime's fee rules as well.
A fixed fee paid in instalments on completing agreed stages is not contingent, as long as each instalment is payable when the stage is done, whatever the stage's outcome. What turns a milestone fee into a contingent fee is a trigger based on a result, such as "payable if the refund is granted".
Worked cases
Case 1: a tax appeal on a success basis
A client facing a tax demand of ₹80 lakh proposes a fee of 10% of any amount deleted in appeal, so ₹8 lakh if the whole demand is deleted and nothing if the appeal fails. The fee depends entirely on the result of the professional work, and representation in a tax appeal is not one of the Regulation 192 roles. It is not permitted. A defensible alternative is a fixed or time-based fee, for example ₹1.5 lakh for drafting grounds and submissions, ₹1 lakh for hearings and ₹50,000 for post-order work, a total of ₹3 lakh payable as each stage is completed.
Case 2: co-operative society audit
A CA is appointed auditor of a co-operative society with working capital of ₹40 crore, and the appointment sets the fee at 0.05% of working capital, or ₹2 lakh. This falls squarely within the co-operative society exception, which allows a fee based on a percentage of paid-up capital, working capital, or gross or net income or profits. The file should record the appointment, the base used and the calculation.
Case 3: valuation for direct taxes
A CA values a property worth ₹3 crore for the purposes of direct taxes and charges 0.5% of the value, or ₹1.5 lakh. This fits the valuer exception. If the same CA were asked to value the same property to support a sale price negotiation for the client, the direct-tax valuer exception would not apply, and a percentage fee would need another permission or should not be used.
Case 4: a percentage fee for an audit client
A firm's audit client asks the firm's consulting team to arrange finance for 1% of the amount raised. Even if some ICAI text were found that allows percentage fees for such a service, the independence provisions in Volume II must be applied separately because the client is an audit client. Both gates must be passed, and the file should show both.
Questions that expose a disguised contingent fee
- Would the firm earn less if its conclusion were unfavourable to the client?
- Does the amount depend on tax saved, finance raised, cost reduced or a claim won?
- Is a "discretionary bonus" understood by both sides to follow success?
- Was a fixed-fee engagement later amended to add an outcome-linked component?
- Has the service been described broadly to fit an exception that does not really apply?
A yes to any of these means the fee should go back to the partner or ethics reviewer before the engagement letter is signed.
A one-page fee approval note
Record the following before signing the engagement letter: whether the client is an audit or assurance client; the exact service and the capacity in which it is performed; the fee formula; what changes the amount; the Regulation 192 limb or other ICAI text relied on, with its source paragraph; any other law that governs the fee; independence safeguards or the decision to decline; and the approver's name and date. Redo the note whenever the scope, the client relationship or the fee trigger changes. An engagement letter records an agreed basis but cannot make an impermissible fee permissible.
Updated on 27 September 2026: added the text of the clause (10) restriction and the three Regulation 192 exceptions with a link to the Regulations, linked ICAI's announcement of the 13th edition Code of Ethics applicable from 1 April 2026, and reworked the examples with computed figures. Categories that could not be confirmed from the Regulations are no longer listed.
