The Price of Non-Compliance: DPDPA Penalties Explained – What Businesses Need to Know

India’s Digital Personal Data Protection Act, 2023 (DPDPA) doesn’t just introduce a new set of rules for handling personal data; it backs them up with the potential for substantial financial consequences. Unlike previous IT Act provisions, the DPDPA specifies significant monetary penalties for various breaches, aiming to create a strong deterrent against non-compliance. For businesses operating in India or processing the data of Indian residents, understanding these potential penalties and the factors influencing them is critical.

This guide breaks down the DPDPA’s penalty regime, explaining who imposes penalties, what actions can trigger them, and how the penalty amounts are determined.

Who Can Impose Penalties?

The Data Protection Board of India (DPB) is the adjudicatory body established under the DPDPA and is empowered to impose monetary penalties. This occurs after the DPB conducts an inquiry into reported or suspected breaches of the Act or its rules.

What Actions Can Trigger Penalties?

The Schedule annexed to the DPDPA lists specific breaches and their corresponding maximum penalties. It’s important to note these are upper limits, not fixed fines. Key breaches include:

• Failure to take Reasonable Security Safeguards: Up to ₹250 Crore (approximately USD 30 million). This is the highest potential penalty, underscoring the critical importance of robust data security measures.
• Failure to Notify DPB/Data Principals of a Breach: Up to ₹200 Crore (approximately USD 24 million). Timely and appropriate notification of data breaches is a core obligation.
• Breach of Obligations Regarding Children’s Data: Up to ₹200 Crore. This reflects the heightened protection afforded to children’s personal data.
• Breach of Additional Obligations for Significant Data Fiduciaries: Up to ₹150 Crore (approximately USD 18 million). SDFs face higher standards and correspondingly higher penalties for non-compliance with their specific duties (like appointing a DPO, conducting DPIAs, etc.).
• Breach of Data Principal Duties: Up to ₹10,000 (approximately USD 120). This unique penalty is imposed on the individual Data Principal, not the business, for failing to comply with their duties (e.g., providing false information, filing frivolous complaints).
• Breach of Voluntary Undertaking Terms: Penalty up to the extent applicable for the original breach for which the undertaking was given. If an entity provides a voluntary undertaking to the DPB to take specific actions and then fails to adhere to it, they can be penalised.
• Breach of Any Other Provision/Rule: A residual penalty of up to ₹50 Crore (approximately USD 6 million) applies for breaching any other part of the Act or its rules where a specific penalty isn’t explicitly listed.

How is the Penalty Amount Determined?

The DPB will not automatically impose the maximum penalty listed in the Schedule. The DPDPA outlines several factors that the Board must consider when deciding the quantum of the monetary penalty. These factors ensure a degree of proportionality and consider the specifics of each case:

• Nature, gravity, and duration of the breach: How serious was the non-compliance and for how long did it persist?
• Type and nature of personal data affected: Breaches involving more sensitive data (e.g., financial, health, children’s data) are likely to attract higher penalties.
• Repetitive nature of the breach: Repeat offenders or those with a history of similar non-compliance can expect more severe penalties.
• Whether the entity gained or avoided loss due to the breach: If the non-compliance resulted in a financial benefit for the entity or allowed it to avoid a loss, this will be a factor.
• Mitigation efforts taken by the entity: Steps taken by the organisation to mitigate the effects and consequences of the breach, and the timeliness and effectiveness of such actions, will be considered.
• Whether the penalty is proportionate and effective as a deterrent: The penalty should be sufficient to act as a deterrent against future non-compliance, both for the entity in question and for others.
• The likely impact of the penalty on the entity itself: The Board may consider the financial health and size of the organisation to ensure the penalty is not disproportionately crippling, though deterrence remains key.

Key Takeaways on DPDPA Penalties

Businesses must internalise several crucial aspects of the DPDPA’s penalty framework:

• Significant Financial Risk: The potential penalties are substantial and can severely impact businesses of all sizes. Compliance is not just a legal obligation but a financial imperative.
• Focus on Core Obligations: The highest penalties are reserved for failures related to fundamental duties – implementing reasonable security safeguards, notifying breaches, and protecting children’s data. This signals where the DPB’s enforcement focus is likely to be sharpest.
• No Overall Cap (for multiple breaches in one inquiry): Unlike some earlier drafts or other global laws, the DPDPA does not explicitly state an overall cap on the total penalty if multiple distinct breaches are identified and proven in a single inquiry.
• Mitigation Matters: Demonstrating proactive steps to prevent breaches, and swift, effective action to mitigate harm after an incident, can significantly influence the final penalty amount. Good faith efforts are likely to be viewed favourably.
• Government Power to Amend Penalty Amounts: The DPDPA allows the Central Government, by notification, to amend the Schedule and increase these penalty amounts up to double the figures currently listed. This means the financial stakes could potentially rise in the future.
• No Criminal Liability (Imprisonment) for Data Protection Violations: Unlike some initial proposals or certain sectoral laws, the final DPDPA focuses solely on monetary penalties for data protection violations, removing the threat of imprisonment for such breaches under this Act.

Beyond Financial Penalties: Blocking Orders

It is also critical to remember that severe or repeated non-compliance can lead to more than just financial penalties. The DPDPA allows the Central Government, on the reference of the DPB, to order intermediaries to block public access to a Data Fiduciary’s platform or information. This represents a significant operational risk that could cripple a business, irrespective of monetary fines.

Conclusion: Proactive Compliance is Non-Negotiable

The DPDPA’s robust penalty regime underscores the seriousness with which India is approaching data protection. The substantial fines, particularly for failures in core areas like security, breach notification, and the handling of children’s data, necessitate a proactive, diligent, and well-documented approach to compliance.

Businesses must invest in robust data protection practices not merely as an exercise in good governance, but as a critical measure to mitigate significant financial, operational, and reputational risks. Understanding the penalty framework is the first step towards building a resilient and compliant organisation in India’s new data privacy era.

Disclaimer: The information provided in this article is for general informational purposes only and does not constitute legal advice. The content is based on the Digital Personal Data Protection Act, 2023, and the Draft DPDP Rules, which are subject to change. For advice on specific legal issues, please consult a qualified legal professional.