- 01-Aug-2025
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The Digital Personal Data Protection Act, 2023 (DPDPA) is a landmark piece of legislation aimed at safeguarding personal data and privacy in India. It brings significant changes to how tech companies can collect, store, and process personal data. With the increasing reliance on digital platforms, this law aims to strike a balance between data privacy, security, and the growth of the digital economy. The law has major implications for tech companies in terms of data collection practices, consent mechanisms, and user rights.
The Act mandates that tech companies must obtain explicit consent from users before collecting personal data. Consent must be informed, given freely, and the data subject should be fully aware of the purpose for which their data is being collected.
The consent process should be clear, unambiguous, and the user must have the option to withdraw consent at any time. Failure to obtain explicit consent or obtaining consent through deceptive means can lead to penalties.
Data collected by tech companies must be used for specific, legitimate purposes, and it cannot be processed for purposes other than those disclosed at the time of data collection. This limits companies' ability to use collected data for unexpected or undisclosed purposes, such as profiling or targeted advertising without user consent.
Tech companies are required to limit the collection of personal data to only what is necessary for the intended purpose. This is aimed at curbing excessive data collection practices where companies collect more data than needed for their services.
The Act encourages companies to assess the data they collect and ensure they are not storing or processing unnecessary personal information.
Companies must implement adequate security measures to protect personal data from unauthorized access, breaches, and leaks. This includes encryption, data anonymization, and other security protocols to safeguard data both in transit and at rest.
In the event of a data breach, companies are required to notify both the users and the relevant authorities, ensuring transparency and accountability.
The Act grants specific rights to individuals over their personal data. These rights include the right to access their data, the right to correct or update incorrect data, the right to delete data, and the right to restrict the processing of their data in certain circumstances.
Users also have the right to data portability, meaning they can request their data in a machine-readable format to transfer it to another service provider if desired.
The Act introduces provisions around data localization, which mandates that certain types of sensitive personal data be stored and processed within India. This aims to ensure better control over data and reduce the risks associated with cross-border data transfers.
Tech companies that collect or process such data will need to ensure they have adequate infrastructure in India to comply with this requirement.
The law holds data fiduciaries (entities that collect, store, and process personal data) accountable for the data they handle. These companies are required to comply with the Act’s provisions, including maintaining records of data processing activities, implementing security measures, and responding to complaints or inquiries from users.
Companies must also appoint a Data Protection Officer (DPO) to oversee compliance and manage data protection issues.
The Data Protection Board of India will be established to oversee compliance with the law. The Board will have the authority to investigate complaints, impose penalties for violations, and provide guidance to companies on how to comply with the law.
Companies that fail to comply with the Act may face significant financial penalties, including fines based on the severity of the violation.
Tech companies will need to adopt clearer and more transparent consent mechanisms. For example, they will need to obtain explicit consent for each specific data processing purpose, including using data for profiling or marketing.
Companies will have to provide users with clear opt-in and opt-out options for different types of data collection, making it easier for users to control their privacy preferences.
Companies will need to invest in data protection infrastructure, such as secure data storage systems, encryption tools, and compliance teams, to adhere to the requirements of the DPDPA.
Implementing data protection policies, conducting regular audits, and setting up processes for data subject rights will incur significant costs.
Companies will be required to implement privacy-by-design in their products and services. This means integrating data protection measures into the development process from the outset, rather than as an afterthought.
With a focus on data minimization, tech companies will likely need to revisit their data collection strategies and reconsider how much data they collect from users.
As the law requires certain data to remain within India, companies with global operations will face challenges in transferring personal data across borders. They will need to establish data storage and processing infrastructure within India to comply with localization requirements.
Companies will also need to navigate cross-border data transfer mechanisms, ensuring compliance with international data protection standards.
The Act’s provisions for clear communication with users about how their data is being used will likely increase transparency. This can help build trust with consumers, who may be more willing to share personal data if they believe it is being handled responsibly.
Transparent data handling practices, including user-friendly privacy policies and controls, could improve customer loyalty and brand reputation.
Scenario: A tech company that operates a popular social media platform collects user data for personalized advertising. Under the DPDPA, the company must now obtain explicit consent from users for this purpose.
Outcome: The company updates its privacy policy and ensures that users can opt-in or opt-out of data collection for personalized ads. It implements robust security measures, such as end-to-end encryption, and notifies users in case of any data breach.
Result: By complying with the DPDPA, the company avoids penalties and builds trust with its user base, while continuing to operate within the legal framework set by the Act.
The Digital Personal Data Protection Act, 2023 significantly impacts how tech companies collect, process, and store personal data in India. By emphasizing consent, transparency, and data security, the Act aims to protect user privacy while ensuring that companies can still leverage data for business purposes in a lawful and ethical manner. As compliance becomes a priority, tech companies must reassess their data practices to avoid penalties and enhance user trust.
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