How the Digital Personal Data Protection Act (DPDP) Impacts Indian Businesses

India’s Digital Personal Data Protection Act (DPDP) is transforming how organizations handle personal data. This law impacts every business—including startups and SMEs—that collects or processes the personal data of individuals in India. With steep penalties for violations and requirements modeled on global best practices, compliance is now a top priority for sustainable growth and consumer trust.

What Is the DPDP Act?

The DPDP Act, passed in 2023 and operational through detailed DPDP Rules in 2025, establishes stringent processes for collection, use, storage, and sharing of personal data. The law defines two pivotal terms:

Data Principal: The individual whose data is collected (your customers, employees, users).
Data Fiduciary: Any organization that determines the purpose and means of data processing (your business, whether big or small).

Unlike previous IT rules, the DPDP clearly spells out compliance duties and enforceable penalties.

Who Must Comply?

Businesses must build compliance programs around these fundamental principles:

Explicit Consent: Users must know and voluntarily agree to data collection and usage. Consent must be informed, clear, and recorded at all relevant touchpoints.
Purpose Limitation: Data must only be gathered for specific, legal, and disclosed purposes.
User Rights: Users can access, correct, or request deletion of their data at any time.
Secure Processing & Storage: Reasonable security safeguards must be in place to protect data from leaks or misuse.
Breach Notification: Any data breach must be promptly reported to authorities and to affected individuals.

Compliance Roadmap for Small and Mid-Sized Firms

1. Update Data Collection Practices

Use simple, easy-to-understand consent forms throughout the customer journey (website, apps, offline forms).

Record and manage consents efficiently—every opt-in/opt-out action must be traced.
Do not collect unnecessary data; always justify the need for each data point.

2. Audit Data Processes

Catalog all personal data collected—who, what, where, and why it’s stored/processed.
Identify vendors and third parties handling your data; ensure they’re contractually bound to DPDP compliance.
Remove legacy data that’s no longer necessary or doesn’t meet legal consent standards.

3. Empower Data Principals

Provide accessible channels for users to request access, correction, or deletion of their personal data.
Create internal systems for withdrawal and revocation of consent, with procedures for timely deletion.

4. Enhance Security Measures

Implement technical safeguards—encryption, access controls, regular software updates.
Train employees about privacy procedures and safe data handling.
Regularly test system defenses against breaches or leaks.

5. Prepare for Data Breaches

Develop an incident response protocol for quick reporting to authorities and stakeholders (within the statutory timeframes).
Maintain logs and evidence for breach investigations.

6. Designate a Data Protection Officer (DPO)

Significant data fiduciaries (handling large, sensitive datasets) must appoint a DPO.
Even for small firms, a privacy contact point helps with efficient compliance and user trust.

Sector-Specific Notes

Startups and MSMEs: The Central Government can exempt startups based on the volume and nature of personal data processed, but all must undergo readiness assessments.
Children’s Data: Extra care and stricter standards apply when processing data of minors (under 18); separate consent and safeguards are mandatory.

What Are the Penalties for Non-Compliance?

The DPDP regime is backed by heavy financial penalties—not criminal sanctions, but fines that can threaten business survival

Violation Type	Penalty Amount (Per Instance)
Lack of explicit, verifiable consent	Up to ₹50 Crore
Failure to report data breach	Up to ₹250 Crore
Mishandling of children’s data	Up to ₹250 Crore
Not complying with user requests	Up to ₹50 Crore

Penalties apply for each violation—meaning multiple fines for repeat infractions. The Data Protection Board of India (DPBI) adjudicates breaches and issues penalties. Firms may appeal decisions to higher courts.

Practical Example: DPDP Compliance Checklist

Review privacy and consent notices on your website/app.
Set up automated recording of every user consent action.
Map data flows and third-party transfers.
Draft and train staff on breach reporting protocol.
Develop templates for user rights requests (access/correction/erasure).
Schedule regular internal audits for data handling.
Appoint a privacy point-of-contact.
Update contracts with vendors and service providers to include DPDP warranties.

Frequently Asked Questions (FAQs)

Does my small business need a Data Protection Officer?
Only if handling large-scale or sensitive data; otherwise, designate a responsible privacy manager.

What if my business only collects emails for marketing?
DPDP applies—get clear consent, enable opt-outs, don’t share data without permission.

Are any businesses exempt from DPDP?
Startups may get temporary relaxations based on notification by government, but it’s safest to begin compliance now.

How is DPDP different from past data laws?
DPDP is stricter, clearer, and penalty-backed—it’s no longer just voluntary guidelines or advisory notifications.

Conclusion

The DPDP Act marks a turning point for digital business in India. For small and medium-sized firms, compliance with the DPDP is not optional—it’s essential for operational continuity, reputation, and legal safety. Businesses should proactively adapt by updating consents, empowering user rights, securing data, and preparing for enforcement.

Act now: Build DPDP compliance into your workflows for a future-proof, trusted business. For legal templates and compliance automation, consult a data protection expert or explore solutions designed for Indian SMEs.