Section 124A of the Indian Penal Code defines sedition as any act or attempt "to bring hatred or contempt, or excite disaffection towards the government".
The offence is punishable with life imprisonment.
The circular, written in Marathi, is based on English guidelines submitted to the Bombay High Court by the state government about how the law must be applied, Amnesty International said in its statement.
"It suggests that speaking against a government representative would amount to sedition. It also dilutes a requirement in the guidelines that the speech in question would constitute incitement to violence or a threat to public order. This circular makes an already bad law even more likely to be abused," said Abhirr VP, Campaigner at Amnesty International India.
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Speaking to Amnesty International India, Aseem Trivedi said, "This circular must be challenged in court immediately. Governments in India have always misinterpreted laws and guidelines to curb the freedom of expression".
"The sedition law in India is frequently used against activists and human rights defenders. It is a reminder of how colonial era laws continue to threaten the right to freedom of expression, which is recognised by the Constitution of India and international law," Abhirr VP said.