India has fined the local arm of Amnesty International nearly $8 million after a probe into its finances the watchdog said was part of a "witch hunt".

Rights groups have long claimed they face harassment from Prime Minister Narendra Modi's Hindu nationalist administration for highlighting rights abuses, including in the disputed territory of Kashmir.

Amnesty's local bank accounts were frozen in 2020 as part of the probe, forcing the group to lay off staff and halt campaign and research work.

India's Enforcement Directorate, the agency responsible for investigating financial crimes, said Friday that Amnesty had broken foreign funding laws by directing overseas contributions to expand its local operations.

In a statement, it said Amnesty India had been fined $6.5 million for receiving illegal foreign contributions, while its former chief executive Aakar Patel was fined an additional $1.3 million.

Amnesty India said the allegations against it were "patently untrue" and criticised the Enforcement Directorate for issuing press releases on the case before serving legal notices.

"Putting a squeeze on its critics through trumped-up charges under repressive laws has become routine for this Indian Government," the group said on Twitter.

Like in Russia under President Vladimir Putin and Viktor Orban's Hungary, critics say Modi's government has sought to pressure rights groups by heavily scrutinising their finances and clamping down on foreign funding.

In 2015, the year after Modi took office, the Indian government froze the bank accounts of environmental organisation Greenpeace's India unit.

Amnesty faced sedition charges, later dropped, the following year over an event to discuss human rights violations in Kashmir.

In 2018, the Enforcement Directorate raided Amnesty's office in Bangalore, and the watchdog said investigators later selectively leaked documents to the media.

In 2020, Amnesty India said the freezing of its accounts was part of an "incessant witch-hunt of human rights organizations".

Patel was stopped from flying to the United States earlier this year because of the government's legal action against the human rights watchdog.

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