How the Digital Personal Data Protection Act, 2023 Affects Indian Businesses

Introduction

In today's digital-first economy, the volume of personal data being generated, stored, and processed is growing at an unprecedented rate. From e-commerce transactions and fintech solutions to health-tech platforms and SaaS models, businesses in India are increasingly reliant on consumer data to personalize services, drive innovation, and remain competitive. However, this dependence comes with a rising responsibility to ensure the privacy and protection of that data.

Recognizing the urgent need to create a robust legal framework around personal data, the Government of India introduced the Digital Personal Data Protection (DPDP) Act, 2023. This landmark legislation marks a significant shift toward empowering individuals with greater control over their data, while simultaneously holding businesses accountable for how they collect, use, and store that data.

With the recent introduction of the Digital Personal Data Protection Act, 2023, the landscape of data protection in India has undergone a significant transformation. The Act is not just relevant for large corporations—it is equally critical for startups, MSMEs, and any entity handling user data. For Indian businesses, compliance is no longer optional; it is a legal and strategic necessity in today’s privacy-conscious market.

Background: What is the Digital Personal Data Protection Act, 2023?

The Digital Personal Data Protection (DPDP) Act, 2023, is a landmark legislation passed by the Indian Parliament aimed at safeguarding individuals’ data in an increasingly digital world. Enacted by the Ministry of Electronics and Information Technology (MeitY), the Act lays the groundwork for how businesses and government entities in India must collect, store, and process personal data lawfully and transparently.

The key objective of the Act is to balance the individual's right to privacy with the legitimate needs of data processing for innovation, national interest, and business operations. It empowers individuals, known as Data Principals, with control over their data and mandates that organizations, known as Data Fiduciaries, handle this data responsibly.

Under the Act:

• Personal Data refers to any data that can identify an individual.
• A Data Fiduciary is any entity that determines the purpose and means of processing personal data.
• A Data Principal is the individual to whom the data relates.

The legislation draws heavily from global standards like GDPR, making it crucial for Indian businesses to reevaluate their data privacy policies and adopt compliance measures.

Scope and Applicability of the Act

The Digital Personal Data Protection Act, 2023, applies to a broad spectrum of entities that process personal data within Indian jurisdiction. This includes Indian businesses of all sizes—whether startups, MSMEs, or large corporations—that collect, store, or use personal data of individuals (data principals). Importantly, the Act also applies to foreign entities if they handle the personal data of individuals located in India, especially when offering goods or services.

Under the Act, entities handling data are categorized as Data Fiduciaries and Significant Data Fiduciaries. A Data Fiduciary is any person or organization that determines the purpose and means of processing personal data. However, those with large-scale data processing operations—especially involving sensitive or children's data—may be designated as Significant Data Fiduciaries by the government. These entities are subject to stricter compliance measures, including appointing a Data Protection Officer (DPO) and undergoing periodic audits.

All businesses covered under the Act must adhere to obligations such as obtaining user consent, maintaining transparency, ensuring data security, and complying with user rights. Non-compliance can lead to hefty financial penalties and reputational damage.

Key Provisions that Impact Businesses in India

The Digital Personal Data Protection Act, 2023, introduces critical obligations for businesses operating in India. First, companies must implement robust consent management systems. Users (data principals) must be informed clearly about how their data will be used, and consent must be freely given, specific, informed, and revocable.

Data storage and processing must follow the principles of purpose limitation and data minimization. Businesses are required to collect only relevant data and store it securely for a defined duration. RBI-aligned companies, especially in fintech and banking, must also comply with sector-specific storage norms outlined by the regulator.

The Act allows cross-border data transfer to certain countries, subject to government notification. This provides flexibility for global operations while ensuring that Indian user data is not misused abroad.

Larger businesses may be classified as Significant Data Fiduciaries, requiring the appointment of a Data Protection Officer (DPO) to ensure internal compliance and liaison with authorities.

Non-compliance invites strict penalties ranging from ₹50 crore to ₹250 crore, making enforcement a serious concern. As per IndiaFilings, companies must prioritize legal audits and system upgrades to stay compliant and avoid reputational and financial risks.

Key Provisions that Impact Businesses in India

The Digital Personal Data Protection Act, 2023, introduces a new legal framework that directly impacts how Indian businesses collect, store, process, and transfer personal data. Below is a consolidated comparison table that outlines each major provision, what it entails, and how it affects business operations:

Provision	What It Means	Impact on Businesses
Consent Management	Consent must be free, specific, informed, and revocable.	Businesses must design clear consent forms and mechanisms to track and manage user permissions.
Notice Requirements	Users must be given detailed, easy-to-understand notices about data use.	Mandatory to provide purpose-driven, multilingual privacy notices during data collection.
Data Storage & Processing	Data must be collected for a defined purpose and stored securely for a limited time.	Organizations must implement purpose limitation and update their retention and deletion policies.
Cross-Border Data Transfer	Data can be transferred only to countries notified by the central government.	Companies with international operations must review server locations and evaluate vendor jurisdictions.
Duties of DPOs	Significant Data Fiduciaries must appoint a Data Protection Officer for oversight and compliance.	Larger firms or those handling sensitive data must hire qualified DPOs and define their legal responsibilities.
Penalties for Non-Compliance	Violations can attract fines up to ₹250 crore depending on the nature and severity of the breach.	Requires proactive audits, legal documentation, and staff training to avoid financial and reputational risk.

Businesses, especially in finance, healthcare, and technology sectors, are advised to revisit their internal processes. As per IndiaFilings and RBI regulatory notes, aligning with the DPDP Act is not just a legal obligation but a competitive necessity. Seedling Associate offers specialized compliance solutions tailored for businesses navigating the complexities of data protection in India.

Compliance Checklist for Indian Businesses under DPDP 2023

To ensure adherence to the Digital Personal Data Protection Act, 2023, Indian businesses must take a proactive approach toward data governance. Here's a streamlined checklist to guide your compliance journey:

• Appoint a Data Protection Officer (DPO): If your business qualifies as a Significant Data Fiduciary under the Act, appointing a DPO is mandatory. The DPO must reside in India and be responsible for overseeing compliance and serving as a liaison with the Data Protection Board.
• Update Privacy Policies: Review and revise your privacy policy to align with the consent-based framework. It should clearly state what data is collected, its purpose, and the rights of users.
• Implement Consent Mechanisms: Ensure users provide clear, informed, and affirmative consent before processing their data. Consent must be revocable and tracked effectively.
• Strengthen Data Security: Adopt robust cybersecurity protocols to prevent data breaches. Regular audits, encryption, and access control are key practices.
• Train Employees: Conduct regular training to help internal teams understand their responsibilities under DPDP 2023, including handling personal data lawfully.

These steps, based on MCA recommendations and Seedling Associate's compliance insights, form the foundation of responsible data protection in India and help mitigate legal risks.

Sector-wise Implications of the DPDP Act, 2023

The Digital Personal Data Protection Act, 2023, introduces critical obligations for Indian businesses, with sector-specific considerations becoming essential for compliance.

• E-commerce & Retail platforms must prioritize secure collection, storage, and processing of vast volumes of customer data. Clear consent mechanisms and transparent privacy policies are now mandatory to avoid penalties and loss of customer trust.
• In the FinTech space, companies are doubly regulated—both by the DPDP Act and RBI guidelines. Financial data qualifies as sensitive personal information, requiring stringent security measures, clear consent, and breach reporting frameworks.
• HealthTech startups and institutions are under special scrutiny due to the sensitive nature of health records. Under the DPDP Act, explicit consent and strong anonymization protocols are essential. Overlaps with FSSAI compliance for food-tech companies handling customer wellness data are also relevant.
• For startups, the government’s DPIIT recognition brings some procedural ease, but compliance with data protection norms is non-negotiable. Startups dealing with international users must adhere to DGFT and cross-border data transfer rules.

Overall, each sector must tailor its data governance approach to align with both the DPDP Act and existing regulatory frameworks.

How Seedling Associate Can Help

At Seedling Associate, we provide comprehensive legal and compliance solutions to help Indian businesses align with the new mandates under the Digital Personal Data Protection Act, 2023. Our end-to-end compliance consulting covers everything from risk assessment to full implementation of privacy frameworks tailored to your business size and sector.

We assist in the appointment of Data Protection Officers (DPOs) and offer expert legal advice to ensure your organization meets fiduciary obligations. Our team specializes in drafting and reviewing privacy policies, consent forms, and internal data protocols to make your documentation robust and regulation-ready.

For businesses that may face scrutiny or compliance notices, we offer representation before regulatory bodies, helping you respond effectively and professionally. Additionally, our ongoing data audit and advisory services ensure you remain compliant even as policies evolve.

With a deep understanding of corporate law, intellectual property, and startup compliance, Seedling Associate is your trusted partner in navigating the complexities of data protection in India. Explore our compliance and corporate law services to learn more about how we can support your business growth—safely and securely.

Conclusion

In today’s digital-first economy, safeguarding personal data is no longer optional—it’s a legal necessity. The Digital Personal Data Protection Act, 2023, has ushered in a new era of accountability for Indian businesses, compelling them to adopt robust data privacy frameworks. From managing consent to ensuring secure data storage and enabling user rights, the Act redefines how businesses interact with customer data.

Staying compliant isn’t just about avoiding penalties; it’s about building credibility, fostering customer trust, and future-proofing your operations. Businesses that prioritize data privacy are more likely to attract global partnerships, investor confidence, and customer loyalty.

Navigating the legal nuances of the DPDP Act can be complex, but you don’t have to do it alone. Seedling Associate offers end-to-end guidance—from policy drafting to implementation audits—to ensure your organization aligns seamlessly with evolving legal mandates.

As the regulations around data protection in India continue to evolve, Seedling Associate is here to keep your business future-ready and compliant. Contact us today to schedule your DPDP compliance audit and take the first step toward securing your digital future.