Section 4 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.
Section 4 sets the punishment for the offence created by section 3. The base term is rigorous imprisonment of not less than three years which may extend to seven years, together with liability to fine. A proviso raises the upper limit to ten years where the proceeds of crime relate to an offence under paragraph 2 of Part A of the Schedule.
This article reads the section from the consolidated text of the Act consulted (amendments shown up to 1 August 2019). Later amendments and notifications should be checked; nothing after that date is stated here.
A person who commits the offence of money-laundering is punishable with rigorous imprisonment for not less than three years, which may extend to seven years, and is also liable to fine. Where the proceeds of crime relate to an offence under paragraph 2 of Part A of the Schedule, the words "seven years" are read as ten years. The section prints no figure as the limit of the fine.
What section 4 provides
| Feature | As printed |
|---|---|
| Who | "Whoever commits the offence of money-laundering" |
| Kind of imprisonment | Rigorous |
| Minimum term | Not less than three years |
| Maximum term | May extend to seven years |
| Fine | "shall also be liable to fine" |
| Proviso | If the proceeds of crime involved relate to any offence specified under paragraph 2 of Part A of the Schedule, the maximum becomes ten years |
The offence that triggers the punishment is defined in section 3. Section 4 does not repeat the conduct; it speaks of "the offence of money-laundering" and prescribes the consequence. Our article on section 3 sets out the processes and the continuing activity that go to that offence.
If you are facing a prosecution or a complaint under the Act and need to understand how the stated term and the Schedule paragraph interact with your facts, you can discuss the text and the documents through legal dispute resolution.
The term of imprisonment
The text says "rigorous imprisonment for a term which shall not be less than three years but which may extend to seven years". Three features follow from the wording.
- The imprisonment is rigorous, not simple.
- There is a floor of three years. The wording "shall not be less than" is not softened by any power to go lower in this section.
- There is a ceiling of seven years in the ordinary case.
Section 4 contains no provision for a lesser term in special circumstances and no mention of an alternative to imprisonment. If the Act has other provisions touching a sentence, they are in other sections and are not read into this one here.
The fine
The imprisonment is accompanied by liability to fine: the offender "shall also be liable to fine". The text then carries a footnote mark where a figure would have been, and footnote 3 says: "The words 'which may extend to five lakh rupees' omitted by Act 2 of 2013, s. 4 (w.e.f. 15-2-2013)." That is history. As the section stands in the text consulted, no amount is printed as the limit of the fine, and this article states none.
The word "also" matters. The fine is in addition to imprisonment, not in place of it. The section uses "liable to", which describes exposure to a fine; the text does not say how a fine is fixed, and it does not say what follows if a fine is not paid. Those are matters for the other provisions of the Act and for the law that governs sentencing and recovery; check the current procedural, penal or other law for the corresponding provision.
The ten-year proviso
The proviso says that where the proceeds of crime involved in money-laundering relates to any offence specified under paragraph 2 of Part A of the Schedule, "the provisions of this section shall have effect as if for the words 'which may extend to seven years', the words 'which may extend to ten years' had been substituted."
Paragraph 2 of Part A of the Schedule is headed "Offences under the Narcotic Drugs and Psychotropic Substances Act, 1985 (61 of 1985)", and lists the sections of that Act and a short description of each. For the list as printed, see our article on Part A of the Schedule: narcotics, arms, wildlife, environment and other special Acts. The reader should check the current law for the corresponding provision of the Narcotic Drugs and Psychotropic Substances Act, 1985.
Two points on how the proviso works:
- It changes only the ceiling. The floor of three years stays as in the main part, because only the words "which may extend to seven years" are replaced.
- It applies by reference to the offence to which the proceeds relate, not by reference to the identity of the person charged.
| Proceeds relate to | Minimum | Maximum |
|---|---|---|
| A scheduled offence other than paragraph 2 of Part A | Three years | Seven years |
| An offence specified under paragraph 2 of Part A | Three years | Ten years |
A worked illustration
These names are invented. Mr Karan Bedi is charged with the offence of money-laundering. The proceeds said to be involved relate to an offence listed under paragraph 5 of Part A of the Schedule. On the text of section 4, the punishment is rigorous imprisonment of not less than three years which may extend to seven years, and he is also liable to fine. Had the proceeds related to an offence under paragraph 2 of Part A, the ceiling would be ten years. The same minimum would apply.
The example only shows how the section is read. Whether any person is guilty, what term is imposed and what fine is set are matters decided in the proceedings, and the text consulted contains no rule on them beyond section 4.
How section 4 sits with the rest of the Act
Section 4 closes Chapter II. Chapter III begins with attachment under section 5, which works on property rather than on the person. Procedure for the trial of the offence, including the Special Courts, is in later chapters, and our article on special courts and criminal procedure covers sections 43, 46 and 47. Our general guide, Penalties Under PMLA: Imprisonment and Fine, gives a wider overview.
Need help with a charge or a notice under the Act?
The consequences in section 4 depend on which scheduled offence the proceeds are said to relate to. Our team can go through the allegation, the Schedule paragraph relied on and the documents with you through legal dispute resolution.
Key takeaways
- The punishment is rigorous imprisonment for not less than three years, which may extend to seven years, together with liability to fine.
- Where the proceeds of crime relate to an offence under paragraph 2 of Part A of the Schedule, the maximum becomes ten years.
- The proviso replaces only the words "which may extend to seven years"; the three-year minimum stays.
- The fine is in addition to imprisonment, and the text as consulted prints no limit for it.
- Footnote 3 records that the words "which may extend to five lakh rupees" were omitted by Act 2 of 2013 (w.e.f. 15-2-2013); that is history, not the rule.
- Check the current law for the Narcotic Drugs and Psychotropic Substances Act, 1985 named in paragraph 2.
Read next
- Section 3: offence of money-laundering
- Section 5: provisional attachment of property
- Part A of the Schedule: narcotics, arms, wildlife, environment and other special Acts
- Penalties Under PMLA: Imprisonment and Fine
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.