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Cost and Management Audit · Anti-Money Laundering

Punishment for Money-Laundering under Section 4 of PMLA

Updated 11 October 2026 · Fact-checked

Section 4 of the PMLA, 2002 punishes the offence of money-laundering with rigorous imprisonment of at least three years, extendable to seven years, plus liability to fine. If the proceeds relate to an offence in paragraph 2 of Part A of the Schedule, the maximum becomes ten years.

Understand Punishment for Money-Laundering under Section 4

Section 3 defines the offence. Section 4 gives the punishment. Keep this split clear: Section 3 asks "what did the person do?" and Section 4 asks "what is the sentence?"

The punishment has two parts. First, rigorous imprisonment. The minimum is three years. The maximum is seven years. Second, the person is also liable to fine. The Act now sets no upper limit on the fine, because the words "which may extend to five lakh rupees" were omitted with effect from 15-2-2013.

There is one proviso that raises the ceiling. Where the proceeds of crime relate to any offence specified under paragraph 2 of Part A of the Schedule, the words "seven years" are read as "ten years". The minimum stays at three years. Only the upper limit changes. The syllabus summary links this proviso to narcotics offences. Section 4 itself refers only to paragraph 2 of Part A of the Schedule, so write it that way in your answer and add the narcotics link as explanation.

The sentence is mandatory in its floor. The court has no power under Section 4 to impose less than three years of rigorous imprisonment. It chooses the term between three and seven (or ten) years.

The related provisions matter for application questions. Under Section 44, an offence punishable under Section 4 is tried by the Special Court for the area where the offence was committed. Under the second proviso to Section 45(1), the Special Court takes cognizance of an offence punishable under Section 4 only on a written complaint by the Director or by an authorised officer of the Central or a State Government.

Key rules to remember

Basic punishment
Rigorous imprisonment: minimum 3 years, maximum 7 years, plus liability to fine
Fine has no statutory upper limit after the 2013 omission of the five lakh cap.
Proviso (Schedule Part A, paragraph 2)
Rigorous imprisonment: minimum 3 years, maximum 10 years, plus liability to fine
Only the maximum rises. The minimum remains three years.
Section 3 versus Section 4
Section 3 = offence (what is done); Section 4 = punishment (what follows)
Section 3 covers concealment, possession, acquisition, use, projecting or claiming as untainted property.
Trial and cognizance
Section 44: Special Court tries; Section 45 second proviso: written complaint by Director or authorised officer
Applies to offences punishable under Section 4.

How to solve Punishment for Money-Laundering under Section 4 questions

Use this method for any question asking for the punishment in a money-laundering scenario.

  1. 1Identify the act. Check whether the person attempted, assisted, was a party to, or was involved in concealment, possession, acquisition, use, or projecting or claiming proceeds of crime as untainted property. This is Section 3.
  2. 2State that if the offence is made out, Section 4 applies.
  3. 3Check the source of the proceeds. Ask whether they relate to an offence under paragraph 2 of Part A of the Schedule (the narcotics-linked proviso).
  4. 4Pick the range. Use 3 to 7 years normally, or 3 to 10 years if the proviso applies.
  5. 5Add that the person is also liable to fine, with no fixed upper limit.
  6. 6Mention the forum if asked: Special Court under Section 44, and a written complaint under the second proviso to Section 45(1).
  7. 7Close with a clear conclusion in one line.

Quickest way: Three-check shortcut

When to use it: Use for MCQs and short case-based questions where you must give the term of imprisonment.

  1. Check 1: Is it money-laundering under Section 3? If not, Section 4 does not apply.
  2. Check 2: Do the proceeds relate to paragraph 2 of Part A of the Schedule? If yes, the maximum is 10 years. If no, it is 7 years.
  3. Check 3: Remember the floor is 3 years in both cases, and fine is added.
  4. Reject any option that shows a minimum other than three years or a fixed fine of five lakh rupees.

Common mistakes in Punishment for Money-Laundering under Section 4

  • Saying the maximum is ten years in every case.

    Students remember the larger number and apply it to all cases.

    Fix: Ten years applies only under the proviso. The normal maximum is seven years.

  • Saying the minimum becomes five years or seven years under the proviso.

    Students assume both ends of the range rise.

    Fix: The proviso replaces only the words "which may extend to seven years". The minimum stays at three years.

  • Writing that fine is up to five lakh rupees.

    Older notes still carry the original cap.

    Fix: The cap was omitted with effect from 15-2-2013. Write that the person is liable to fine, with no statutory ceiling.

  • Mixing up Sections 3 and 4.

    Both sections are short and appear together in the syllabus.

    Fix: Section 3 is the offence. Section 4 is the punishment. Use that wording in every answer.

  • Writing simple imprisonment instead of rigorous imprisonment.

    Students recall only the term and not the type.

    Fix: Section 4 says rigorous imprisonment. Always write the word rigorous.

  • Naming the narcotics link without citing the Schedule.

    Students rely on the topic summary and skip the statutory wording.

    Fix: Cite paragraph 2 of Part A of the Schedule, then add that it is the narcotics-related group.

Worked examples

Example 1

Ramesh knowingly hides cash earned from a scheduled offence that is not in paragraph 2 of Part A of the Schedule and presents it as legitimate business income. State the offence and the punishment under the PMLA, 2002.

Show the solution
  1. Ramesh knowingly conceals the proceeds and projects them as untainted property. These are activities listed in Section 3.
  2. So he commits the offence of money-laundering.
  3. Section 4 prescribes the punishment. The proceeds do not relate to paragraph 2 of Part A, so the proviso does not apply.
  4. The imprisonment is rigorous, for at least three years and up to seven years.
  5. He is also liable to fine.

Answer: Ramesh commits money-laundering under Section 3. Under Section 4 he is punishable with rigorous imprisonment of 3 to 7 years and is also liable to fine.

Example 2

Meera helps a friend deposit money that she knows comes from an offence specified under paragraph 2 of Part A of the Schedule, so that it appears lawful. What is the maximum imprisonment she faces, and who may file the complaint before the Special Court?

Show the solution
  1. Meera knowingly assists in a process connected with proceeds of crime and its projection as untainted property. This falls under Section 3, so the offence is made out.
  2. The proceeds relate to paragraph 2 of Part A of the Schedule, so the proviso to Section 4 applies.
  3. The words "seven years" are read as "ten years". The range becomes 3 to 10 years of rigorous imprisonment, with liability to fine.
  4. Under the second proviso to Section 45(1), the Special Court takes cognizance of an offence under Section 4 only on a written complaint.
  5. That complaint must come from the Director or from an officer of the Central or a State Government authorised in writing by the Central Government.

Answer: The maximum imprisonment is ten years (minimum three years, rigorous, plus fine). The complaint must be in writing from the Director or an authorised Central or State Government officer.

Exam tips

  • In MCQs, the traps are 5 years, 7 years and 10 years. Match the number to whether the proviso applies.
  • Write the section number with the words: Section 4 for punishment, Section 3 for the offence.
  • In case scenarios, first prove the Section 3 activity, then apply Section 4. Marks go to this order.
  • Learn the forum chain together: Section 44 for trial and the second proviso to Section 45(1) for the complaint.
  • Do not quote a fine amount. State that the person is liable to fine.

Practice questions from Anti-Money Laundering

Punishment for Money-Laundering under Section 4 in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Punishment for Money-Laundering under Section 4: frequently asked questions

What is the punishment under Section 4 of PMLA?

Rigorous imprisonment for a term of at least three years, extendable to seven years, and liability to fine. Where the proceeds relate to an offence in paragraph 2 of Part A of the Schedule, the maximum is ten years.

What is the difference between Section 3 and Section 4 of PMLA?

Section 3 defines the offence of money-laundering, such as concealment, possession, acquisition, use, or projecting or claiming proceeds as untainted. Section 4 states the punishment for that offence.

Is there a maximum fine under Section 4?

No. The earlier cap of five lakh rupees was omitted with effect from 15-2-2013. The Act now says the person is liable to fine without stating a limit.

Which court tries an offence punishable under Section 4?

The Special Court for the area where the offence was committed, under Section 44. It takes cognizance only on a written complaint by the Director or an authorised officer, as per the second proviso to Section 45(1).