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.
Most of the Act turns on a handful of definitions in section 2(1): what counts as "proceeds of crime", what "property" covers, which offences are "scheduled offences", and how "attachment", "transfer" and "value" are understood. This article reads each of those clauses as printed and shows how they fit together.
The text consulted is as per the consolidated text of the Act consulted (amendments shown up to 1 August 2019). Amendments and notifications after that date should be checked; nothing later is asserted here.
Proceeds of crime means property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence, or the value of such property. Property covers assets of every description, wherever located, including property used in committing an offence. A scheduled offence is one in Part A of the Schedule, one in Part B if the total value involved is one crore rupees or more, or one in Part C.
Proceeds of crime: clause (u)
Clause (u) defines "proceeds of crime" as any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence, or the value of any such property. Two additions appear in square brackets in the text consulted:
- the words "or where such property is taken or held outside the country, then the property equivalent in value held within the country" (inserted by Act 20 of 2015, section 145, w.e.f. 14-5-2015), and
- the words "or abroad" (inserted by Act 13 of 2018, section 208, w.e.f. 19-4-2018).
The Explanation, inserted by Act 23 of 2019, section 192 (w.e.f. 1-8-2019), says "for the removal of doubts" that proceeds of crime include property not only derived or obtained from the scheduled offence but also any property which may directly or indirectly be derived or obtained as a result of any criminal activity relatable to the scheduled offence.
Read in order, the clause has three parts. It starts with the property obtained from criminal activity relating to a scheduled offence. It treats the value of that property as proceeds as well. It also reaches property equivalent in value where the property is taken or held outside the country. The criminal activity must "relate to" a scheduled offence; that link is what the next sections of the Act, starting with the offence in section 3, build on. Our general guide on the key definitions of money laundering and proceeds of crime gives an overview.
If you hold property and want to know whether it could be described as proceeds under this clause, a legal due diligence review of its source and chain of title can establish the facts that the definition turns on.
Property: clause (v)
Clause (v) defines "property" as any property or assets of every description, whether corporeal or incorporeal, movable or immovable, tangible or intangible, and includes deeds and instruments evidencing title to, or interest in, such property or assets, wherever located.
The Explanation, inserted by Act 2 of 2013 (w.e.f. 15-2-2013) according to the footnote, says "for the removal of doubts" that the term "property" includes property of any kind used in the commission of an offence under this Act or any of the scheduled offences.
The definition has no list of exclusions. The words "wherever located" mean the clause is not confined to property inside India.
Scheduled offence: clause (y)
| Sub-clause | Offences covered |
|---|---|
| (i) | The offences specified under Part A of the Schedule |
| (ii) | The offences specified under Part B of the Schedule if the total value involved in such offences is one crore rupees or more |
| (iii) | The offences specified under Part C of the Schedule |
Sub-clause (ii) was substituted by Act 21 of 2009 (w.e.f. 1-6-2009), and the words "one crore rupees" were substituted for "thirty lakh rupees" by Act 20 of 2015, section 145 (w.e.f. 14-5-2015); the earlier figure is history only. The Schedule is dealt with in this series in articles on Part A, Paragraph 1, Part A: corruption, securities, customs and company-fraud offences, Part A: other special Acts and Part B and Part C. Our existing guide, Scheduled Offences Under PMLA: Complete List, is a general overview.
Offence of cross border implications: clause (ra)
Clause (ra), inserted by Act 21 of 2009 (w.e.f. 1-6-2009), says "offence of cross border implications" means:
- any conduct by a person at a place outside India which constitutes an offence at that place and which would have constituted an offence specified in Part A, Part B or Part C of the Schedule had it been committed in India, and if such person transfers in any manner the proceeds of such conduct or part thereof to India (the words "transfers in any manner" were substituted for "remits" by Act 2 of 2013, w.e.f. 15-2-2013); or
- any offence specified in Part A, Part B or Part C of the Schedule which has been committed in India and the proceeds of crime, or part thereof, have been transferred to a place outside India, or any attempt has been made to transfer the proceeds of crime, or part thereof, from India to a place outside India.
The Explanation says nothing in the clause adversely affects any investigation, enquiry, trial or proceeding before any authority in respect of the offences specified in Part A or Part B of the Schedule before the commencement of the Prevention of Money-laundering (Amendment) Act, 2009 (21 of 2009), as the text prints it.
Attachment, investigation, money-laundering and records
- Attachment, clause (d): prohibition of transfer, conversion, disposition or movement of property by an order issued under Chapter III. The attachment power is explained in our article on section 5.
- Investigation, clause (na): includes all the proceedings under this Act conducted by the Director or by an authority authorised by the Central Government under this Act for the collection of evidence. It was inserted by Act 20 of 2005 (w.e.f. 1-7-2005).
- Money-laundering, clause (p): has the meaning assigned to it in section 3.
- Records, clause (w): include records maintained in the form of books or stored in a computer or such other form as may be prescribed.
- Corresponding law, clause (ia): any law of any foreign country corresponding to any of the provisions of this Act or dealing with offences in that country corresponding to any of the scheduled offences (inserted by Act 2 of 2013, w.e.f. 15-2-2013).
Person, transfer and value
Clause (s) says "person" includes (i) an individual, (ii) a Hindu undivided family, (iii) a company, (iv) a firm, (v) an association of persons or a body of individuals, whether incorporated or not, (vi) every artificial juridical person not falling within the preceding sub-clauses, and (vii) any agency, office or branch owned or controlled by any of those persons.
Clause (za) says "transfer" includes sale, purchase, mortgage, pledge, gift, loan or any other form of transfer of right, title, possession or lien.
Clause (zb) says "value" means the fair market value of any property on the date of its acquisition by any person, or if such date cannot be determined, the date on which such property is possessed by such person.
How the definitions work together
| Question | Clause that answers it |
|---|---|
| Is the underlying offence on the list? | (y), read with the Schedule |
| Is there property derived from criminal activity relating to it? | (u) |
| What can be treated as property? | (v) |
| Was property moved across borders? | (ra), (u) |
| Which date fixes the value? | (zb) |
| What counts as a transfer? | (za) |
Imagine Raman Textiles Pvt Ltd is told that an account has been identified as holding "proceeds of crime". The first question is whether the activity relates to a scheduled offence in Part A, in Part B at a total value of one crore rupees or more, or in Part C. If not, clause (u) is not met. If so, clause (v) shows that even immovable property or a deed of title is within the term, and clause (zb) fixes value at the date of acquisition. The definitions do not by themselves decide guilt or liability; they set the vocabulary that later sections use.
Other laws named in section 2 and the Schedule are quoted in this series as printed. The reader should check the current procedural, penal or other law for the corresponding provision of each enactment named.
Need help with a property or source-of-funds question?
Whether an asset is open to being described as proceeds of crime depends on its history, its owners and the offence it is said to relate to. We can examine the documents and the chain of title with you through legal due diligence.
Key takeaways
- Proceeds of crime means property derived or obtained, directly or indirectly, from criminal activity relating to a scheduled offence, or the value of that property.
- The definition extends to equivalent-value property held within the country where property is taken or held outside, and to property abroad, as the bracketed words show.
- Property covers assets of every description, wherever located, and includes property used in committing an offence under the Act or a scheduled offence.
- A scheduled offence is a Part A offence, a Part B offence where the total value involved is one crore rupees or more, or a Part C offence.
- "Value" is fair market value on the date of acquisition, or the date of possession if the acquisition date cannot be determined.
- Attachment, as defined, is a prohibition on transfer, conversion, disposition or movement under an order issued under Chapter III.
Read next
- Section 3: offence of money-laundering
- Section 1 and the authority terms defined
- Reporting entity, financial institution, intermediary and beneficial owner defined
- Part B and Part C of the Schedule
Disclaimer: Based on the consolidated text of the Prevention of Money-laundering Act, 2002 published by the Enforcement Directorate, showing amendments up to Act 23 of 2019 (1 August 2019), and on the Department of Revenue consolidated copy of the Prevention of Money-laundering (Maintenance of Records) Rules, 2005 listing amendments up to 19 July 2024, as consulted on 2 October 2026. Later amendments, notifications, other rules and regulator directions should be checked. This article is general information, not legal advice; check the official text before acting.