Economic, Commercial and Intellectual Property Laws · Prevention of Money Laundering

Punishment for Money Laundering under Section 4 PMLA

Updated 11 October 2026 · Fact-checked

Section 4 of the Prevention of Money-Laundering Act, 2002 punishes the offence of money-laundering with rigorous imprisonment of at least three years, extendable to seven years, and also fine. If the proceeds relate to an offence under paragraph 2 of Part A of the Schedule, the maximum becomes ten years.

Understand Punishment for Money Laundering

Section 3 defines the offence. Section 4 gives the punishment. Keep this split clear: Section 3 answers "what is the offence?" and Section 4 answers "what happens to the person who commits it?"

Under Section 4, whoever commits the offence of money-laundering is punishable with rigorous imprisonment. The term must not be less than three years. It may extend to seven years. The person is also liable to fine.

The fine has no upper limit in the Act now. The earlier words "which may extend to five lakh rupees" were omitted with effect from 15 February 2013. So never write that the fine is capped at ₹5,00,000.

There is one proviso. Where the proceeds of crime relate to any offence specified under paragraph 2 of Part A of the Schedule, the words "which may extend to seven years" are read as "which may extend to ten years". The minimum stays at three years. Only the upper limit rises.

Note the words "rigorous imprisonment". This means imprisonment with hard labour, not simple imprisonment. The Section 4 term is a range, so the court fixes the actual term within it.

Key rules to remember

General punishment under Section 4: Rigorous imprisonment: minimum 3 years, maximum 7 years + fine; Applies to every person who commits the offence of money-laundering, unless the proviso applies.
Proviso to Section 4: Proceeds relate to offence under paragraph 2 of Part A of the Schedule: maximum 7 years becomes 10 years; Minimum stays three years. Fine is still payable.
Fine under Section 4: Fine: no maximum stated in the section; The ₹5 lakh cap was omitted w.e.f. 15-2-2013.
Section 3 versus Section 4: Section 3 = offence (definition); Section 4 = punishment; Section 4 applies only to a person who has committed the offence as defined in Section 3.

How to solve Punishment for Money Laundering questions

Use this order for any question on punishment for money-laundering. It keeps your answer in the provision, facts, conclusion format.

1Identify the question: is it asking for the offence, the punishment, or both?
2State Section 3 briefly: a person who directly or indirectly attempts to indulge, knowingly assists, is knowingly a party, or is actually involved in a process connected with proceeds of crime, such as concealment, possession, acquisition, use, or projecting or claiming it as untainted property.
3Check from the facts whether any of these activities is present. Remember that the activity is continuing until the person enjoys the proceeds in such ways.
4State Section 4: rigorous imprisonment of three to seven years and fine.
5Check whether the proceeds relate to an offence under paragraph 2 of Part A of the Schedule. If yes, the maximum is ten years.
6Conclude clearly with the minimum, the maximum and the fine for the given facts.

Quickest way: Three-line punishment answer

When to use it: Use when the question is short, such as "State the punishment for money-laundering" or a few-mark note.

Write: Section 4 PMLA, 2002 punishes the offence of money-laundering (defined in Section 3).
Write: rigorous imprisonment, minimum three years, maximum seven years, and also fine.
Add the proviso: ten years maximum where proceeds relate to an offence under paragraph 2 of Part A of the Schedule.

Common mistakes in Punishment for Money Laundering

Writing that the fine may extend to ₹5 lakh.
Older notes and books still carry the original wording.
Fix: Say the fine is payable and note that the ₹5 lakh limit was omitted w.e.f. 15 February 2013.
Saying the minimum jail term is seven years or ten years.
Students remember the maximum figures and forget the floor.
Fix: The minimum is always three years. Seven and ten are the maximums.
Saying imprisonment is simple imprisonment or only fine.
Confusion with minor offences.
Fix: Section 4 says rigorous imprisonment and also fine. Both apply.
Mixing Section 3 and Section 4.
Both sections deal with the same offence.
Fix: Section 3 defines the offence. Section 4 prescribes the punishment. Cite each for its own job.
Applying the ten-year maximum to every case.
Students treat the proviso as the main rule.
Fix: Ten years applies only where the proceeds relate to an offence under paragraph 2 of Part A of the Schedule. Otherwise it is seven years.

Worked examples

Example 1

Ravi knowingly holds ₹40,00,000 that he knows are proceeds of a crime and shows it as income from his own business. The crime is not an offence under paragraph 2 of Part A of the Schedule. Is Ravi guilty of money-laundering? State the punishment.

Show the solution

Provision: Section 3 makes a person guilty if he knowingly is a party or actually involved in any process connected with proceeds of crime, including possession and projecting it as untainted property.
Facts: Ravi knowingly possesses the money and presents it as business income. This is possession and projecting as untainted property.
Punishment: Section 4 applies. The term is rigorous imprisonment of not less than three years, extendable to seven years, and also fine.
The ten-year proviso does not apply, as the offence is not under paragraph 2 of Part A of the Schedule.

Answer: Ravi has committed the offence of money-laundering under Section 3. Under Section 4 he is punishable with rigorous imprisonment of three to seven years and also fine.

Example 2

Distinguish between Section 3 and Section 4 of the PMLA, 2002, and state how the punishment changes where the proceeds relate to an offence under paragraph 2 of Part A of the Schedule.

Show the solution

Section 3 defines the offence. It covers attempting, knowingly assisting, being a knowing party, or being actually involved in concealment, possession, acquisition, use, or projecting or claiming proceeds of crime as untainted property.
The Explanation to Section 3 says this is a continuing activity until the person enjoys the proceeds in any such way.
Section 4 gives the punishment: rigorous imprisonment of three to seven years and also fine.
The proviso to Section 4 replaces seven years with ten years where the proceeds relate to an offence under paragraph 2 of Part A of the Schedule.

Answer: Section 3 describes what the offence is. Section 4 prescribes the punishment for it. Normally the maximum is seven years. Under the proviso it is ten years. The minimum stays three years and fine is also payable.

Exam tips

Learn the numbers as a set: 3 minimum, 7 maximum, 10 under the proviso.
Always write "rigorous imprisonment" and "and also fine". Examiners look for both.
In case-study questions, first prove the Section 3 activity from the facts, then apply Section 4.
Mention the continuing nature of the activity from the Explanation to Section 3 if the facts show the person still enjoys the proceeds.
Do not quote a fine limit. Say the fine is payable without the old ₹5 lakh cap.

Practice questions from Prevention of Money Laundering

Punishment for Money Laundering 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: frequently asked questions

What is the punishment for money laundering under Section 4 of PMLA?

Rigorous imprisonment of not less than three years, which may extend to seven years, and also fine. Where the proceeds relate to an offence under 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. Section 4 states the punishment for committing it. You need Section 3 to decide guilt and Section 4 to decide the penalty.

Is there a limit on the fine under Section 4?

The section does not now state a maximum fine. The earlier limit of five lakh rupees was omitted with effect from 15 February 2013.

Does the ten-year term apply to all money laundering cases?

No. It applies only where the proceeds of crime relate to an offence specified under paragraph 2 of Part A of the Schedule. In other cases the maximum remains seven years.