The accused identified as Meenakshi, a resident of Bharatpur in Rajasthan, was arrested yesterday from Jaipur after police laid a trap.
The woman had already taken Rs 5 lakh from the businessman as she had a video purportedly featuring him in a compromising position with her.
But when she demanded Rs 2 crore, the victim decided to approach the police.
"She was called there by the victim on the pretext of giving Rs 40 lakh, as extortion money. A jeweller Arun Kothari was also arrested for helping her. Meenakshi's husband Sandeep managed to flee," a police official said.
"Singh told us that he had established a physical relationship with the woman after they came in contact, but she had allegedly recorded a video of the act with the help of her husband and Manjeet.
"She then threatened to trap him in a rape case and demanded money," the official said.