In an era where data is the new oil, protecting personal information has become more critical than ever.
Governments across the globe are establishing stringent regulations to ensure that individual data is handled with care and accountability.
In India, the Digital Personal Data Protection (DPDP) Act is a significant step towards securing personal data, empowering individuals with rights over their data, and setting out obligations for entities that process it.
However, for many, the DPDP Act may seem complex, filled with legal jargon and technicalities that can be difficult to grasp.
As an accounting automation brand, Suvit understands the importance of secure data handling in today’s digital world, especially for businesses managing sensitive financial information.
Our goal with this blog is to break down the DPDP Act in a way that is engaging, easy to understand, and relevant to you, whether you're an individual concerned about your data or a business wondering how this legislation affects your operations.
What is the DPDP Act?
The DPDP Act, enacted in 2023, is India’s answer to the growing concerns around data privacy. It lays out the rules and regulations for how personal data must be collected, processed, and stored.
The Act gives individuals (referred to as ‘Data Principals’) certain rights over their data while placing obligations on organizations (referred to as ‘Data Fiduciaries’) to protect that data.
But what does this really mean for everyday people and businesses? Let’s dive deeper into its core elements.
A Story of Data Protection Gone Wrong
Imagine this scenario: You’ve recently signed up for an online service, providing them with your personal details, including your email, phone number, and perhaps even your credit card information.
A few months later, you start receiving unsolicited emails, phone calls, and worse – your credit card details have been used for fraudulent purchases. How did this happen?
This is a situation that many individuals have faced due to companies mishandling or failing to protect their customers' personal data. With the DPDP Act in place, companies that collect personal data are now held accountable for ensuring that such scenarios do not occur.
The Rights of Individuals Under the DPDP Act
The DPDP Act empowers individuals with various rights, making sure they have control over their personal data. These rights include:
a. The Right to Access:
Individuals can request access to their personal data held by any organization. This ensures transparency in how data is being used.
b. The Right to Correction and Erasure:
If the data held about you is incorrect, you have the right to have it corrected. Similarly, you can request the erasure of data that is no longer necessary or relevant.
c. The Right to Data Portability:
Individuals can request their data to be transferred from one organization to another in a commonly used format.
d. The Right to Withdraw Consent:
If you’ve given an organization consent to process your data, you have the right to withdraw that consent at any time.
These rights ensure that data principals (the individuals) are not left helpless, providing them with tools to manage how their personal data is handled.
Also Read: How to Withdraw a Trademark in India: A Step-by-Step Guide
Obligations of Businesses: What Data Fiduciaries Must Do
For businesses, the DPDP Act isn’t just about protecting data; it’s about accountability.
Organizations, particularly those handling significant volumes of personal data, are now designated as ‘Significant Data Fiduciaries’ (SDFs), and they must adhere to stricter obligations.
Here’s what businesses need to know:
a. Data Minimization:
Businesses are required to collect only the data that is necessary for their services. For instance, if a company is offering a subscription service, collecting your name and email would suffice—there’s no need for them to collect your passport details.
b. Purpose Limitation:
Personal data collected by businesses must only be used for the purpose for which it was collected. If an online shopping platform collects your data to deliver products, they can’t use it for unsolicited marketing without your explicit consent.
c. Data Security:
Businesses must implement stringent data security practices to prevent unauthorized access or data breaches. They are obligated to report any data breach to the Data Protection Board of India (DPBI) within a set timeframe.
d. Data Retention and Disposal:
Once personal data is no longer needed, businesses are required to securely delete it. Keeping personal data indefinitely is not permitted under the DPDP Act.
How Does the DPDP Act Impact Businesses?
The DPDP Act impacts businesses in significant ways, both positive and challenging. On one hand, it enhances customer trust by ensuring their data is safe, thus building a better brand reputation.
On the other hand, compliance with the Act requires businesses to invest in secure data-handling practices, which may require additional resources.
For startups and SMEs, complying with the DPDP Act means adopting robust data management systems early on.
Although it may seem like an added cost, the long-term benefits of avoiding penalties, building customer trust, and protecting brand reputation far outweigh the costs of non-compliance.
Compliance Surety: The Role of the Data Protection Officer (DPO)
To ensure compliance, companies that handle a large volume of personal data must appoint a Data Protection Officer (DPO).
The DPO is responsible for overseeing data protection strategies and ensuring that the company complies with the regulations set out in the DPDP Act.
They serve as a point of contact between the company and the DPBI.
For smaller businesses that may not have the resources to hire a dedicated DPO, it’s critical to ensure that staff members handling data are well-versed in the requirements of the DPDP Act.
Penalties for Non-Compliance:
Non-compliance with the DPDP Act can result in heavy fines.
For instance, failing to protect personal data adequately or not reporting a data breach can lead to penalties ranging from ₹5 crore to ₹250 crore, depending on the severity of the violation.
These penalties aim to deter businesses from taking data protection lightly.
Also Read: How to Keep Your Financial Records Spot-On with the Income Tax Act, 1961
Why the DPDP Act Matters to Everyone
The DPDP Act is a game-changer in the realm of data privacy in India. It not only empowers individuals with rights over their personal data but also holds businesses accountable for how they handle and protect that data.
As more of our lives move online, having laws that protect our personal information is essential for building trust in the digital economy.
For businesses, compliance with the DPDP Act is not just a legal requirement—it’s a pathway to building customer trust and maintaining a positive brand reputation.
By investing in strong data protection practices, businesses can avoid hefty penalties and foster a sense of security and trust among their customers.
Ultimately, the DPDP Act benefits both individuals and businesses, creating a safer digital environment for all.
