DPDP 3.1.3 – Artificial Intelligence and DPDP

June 9, 2026June 9, 2026 Karthik & Sunil#AICompliance, #AIEthics, #AIGovernance, #ArtificialIntelligence, #ConsentManagement, #DataPrincipal, #DataPrincipalRights, #DataPrivacy, #DataProtection, #DPDPAct, #KarthikAndSunil, #ResponsibleAI, #WearableData, ai, artificial-intelligence, chatgpt, DPDP, dpdp-act, news, technologyLeave a comment

Meena’s Story – She Consented to Track Her Health. She Did Not Consent to Losing Her Insurance.

Meena is a 38-year-old marketing professional. Health-conscious, financially aware, and careful about her choices.

She uses a health tracking wearable — diligently logging her steps, sleep, heart rate, and diet. She consented to the health app processing this data to help her monitor her own wellbeing. That felt like a fair exchange.

What she did not know is that her health app shares data with an insurance aggregator platform. That aggregator’s AI model analyses her sleep patterns, exercise consistency, dietary choices, and heart rate variability — and produces a health risk score. When Meena applies for health insurance, she is offered a premium three times higher than her colleague who does not use a wearable.

She tracked her health to take care of herself. The algorithm used that data to price her out of coverage.

The consent problem — specific purpose, specific basis

The DPDP Act, 2023 draws a hard line on this. Section 6(1) requires consent to be specific — each processing purpose requires its own distinct consent. Meena consented to health monitoring for her personal wellness. She did not consent to health risk profiling for insurance underwriting by a third party.

The telemedicine app illustration in the DPDP Act itself makes this principle concrete: when a telemedicine app asks for consent to access the user’s mobile contact list along with health services consent, the Act declares that second element invalid because it is not necessary for the stated purpose. The principle extends directly to Meena’s situation — health data collected for personal monitoring cannot be repurposed for insurance risk scoring without a separate, specific consent for that distinct purpose.

Section 6(6) reinforces this: once consent is withdrawn, the Data Fiduciary must within a reasonable time cease — and cause its Data Processors to cease — processing that personal data. The insurance aggregator is a Data Processor. If Meena withdraws her consent from the health app, that cessation must cascade downstream.

The Puttaswamy warning — AI creates knowledge people never gave

The Supreme Court’s landmark judgment in Justice K.S. Puttaswamy (Retd.) vs Union of India (2018) contains a prescient warning, referenced in the project knowledge base: the creation of new knowledge complicates data privacy law as it involves information the individual did not possess and could not disclose, knowingly or otherwise.

Meena’s health risk score is new knowledge — created by the AI from her data, about her, that she never produced or shared. She shared step counts. The algorithm inferred cardiovascular risk. She shared sleep data. The algorithm inferred stress patterns. She shared dietary logs. The algorithm inferred metabolic risk. None of these inferences are what she consented to share. Yet each is personal data under Section 2(t) of the DPDP Act — data about an identifiable individual — and the creation and commercial use of that inferred data requires a valid processing basis.

The data security dimension — what the AI pipeline holds is a high-value target

IS Audit Module 6 of the ICAI IS Audit 3.0 Course identifies this clearly: most AI applications are based on massive volumes of data to learn and make intelligent decisions. Machine learning systems depend on data which is often sensitive and personal in nature. Due to this systematic learning, these ML systems can become prone to data breach and identity theft.

The aggregated health data pipeline that feeds Meena’s risk score — wearable data, app analytics, insurance scoring parameters — is not just a compliance liability. It is a high-value breach target. If that pipeline is compromised, the personal data of thousands of health-conscious users is exposed, along with the inferred health risk scores that the algorithm produced from it. Under Rule 6(1) of the DPDP Rules, every layer of this pipeline — encryption, access control, logs, breach detection — must be implemented. Under Rule 7, a breach must be reported to the Data Protection Board within 72 hours.

The CERT-In Guidelines on Secure Adoption and Governance of AI Systems (Version 1.0, 25 May 2026) specifically require organisations to ensure secure and compliant handling of data processed by AI systems — classifying and protecting sensitive data, defining retention and deletion policies, and monitoring AI-related data movement and third-party handling. A health data pipeline shared with an insurance aggregator, without documented data handling obligations, fails this standard.

What Meena is entitled to — and what the platform must build

Under Section 11 of the DPDP Act, Meena has the right to access a summary of all personal data being processed about her, and the identities of all Data Fiduciaries and Processors with whom it was shared. She has the right to know that her wearable data reached an insurance aggregator. She was never told.

Under Section 12, she has the right to request erasure of her personal data. That erasure must cascade to the aggregator. The health app cannot fulfil the erasure obligation without a contractual mechanism to cause downstream processors to delete as well — which Rule 6(1)(f) requires to be built into the Data Processor contract.

Under Section 13, she has the right to grieve the processing. The Data Fiduciary must respond within the prescribed period. If the platform cannot explain how her health data reached an insurance pricing model — it cannot respond to that grievance.

The question every health tech and insurtech organisation must answer

Does your data-sharing agreement with downstream AI platforms define, in writing, the specific purposes for which shared personal data may be used? Does it prohibit repurposing of health data for insurance risk scoring without separate user consent? Does it require the downstream processor to honour erasure requests? Does it include security safeguards aligned with Rule 6?

If the answer to any of these is no — Meena’s situation is not a story. It is your organisation’s next compliance exposure.

Series 2, Episode 1 — Post 3 of 3 | DPDP Meets Emerging Technologies.

Sources: DPDP Act 2023 (Sections 2(t), 6(1), 6(6), 8, 11, 12, 13) | DPDP Rules 2025 (Rules 6(1), 6(1)(f), 7) | ICAI IS Audit 3.0 Course Materials | CERT-In Guidelines on Secure Adoption and Governance of AI Systems (Version 1.0, 25 May 2026) | Justice K.S. Puttaswamy (Retd.) vs Union of India (2018)

Disclaimer

The contents of this post are intended for general awareness and informational purposes only. They do not constitute legal opinion, professional advice, consultancy, statutory interpretation, or a recommendation to act in any particular manner.

The Digital Personal Data Protection Act, 2023, related rules, notifications, regulatory guidance and judicial interpretations may evolve from time to time. The applicability of the law may also vary depending on the facts, sector, nature of data processing, organisational role, contractual terms and compliance framework.

Readers should not rely solely on this post for making legal, business, HR, technology, data-processing or compliance decisions. Specific advice from a qualified legal, privacy, cybersecurity, governance or compliance professional should be obtained before acting on any matter discussed.

The author / publisher shall not be responsible for any loss, liability, claim, penalty or consequence arising from reliance on the contents of this post without independent professional advice.

Authors:
This article has been co-authored by CA. Sunil Elayadath and CA. Karthik Narayanan S, Partners of Karthik & Sunil, together with Mr. Dhanesh P. K., Designated Partner, DSK Sustainability Tech.

DPDP Series 1.8: Penalty under DPDP Act, 2023

May 14, 2026May 14, 2026 Karthik & Sunil#Compliance, #ConsentManagement, #DataCompliance, #DataFiduciary, #DataObligations, #DataPrincipal, #DataPrivacy, #DataProcessor, #DataProtectionBoard, #DataSecurity, #DPDPAct, #DPDPPenalties, #IndiaDataLaw, #KnowYourRole, #PrivacyByDesign, #PrivacyCompliance, #SignificantDataFiduciaryLeave a comment

Penalties Under the DPDP Act, 2023

The DPDP Act establishes a clear and significant penalty framework. Penalties are imposed by the Data Protection Board of India after due inquiry, giving the accused an opportunity to be heard. The penalties are civil in nature — monetary fines, not criminal prosecution.

The Penalty Schedule

Breach	Maximum Penalty
Failure to implement security safeguards	₹250 crore
Failure to notify breach to Board or individuals	₹200 crore
Breach of children’s data obligations	₹200 crore
Breach of Significant Data Fiduciary obligations	₹150 crore
Any other provision of the Act or Rules	₹50 crore
Breach of duties by a Data Principal	₹10,000

What Factors Determine the Penalty Amount?

The Board does not automatically impose the maximum. It considers:

Nature, gravity, and duration of the breach
Sensitivity of the personal data involved
Whether the breach was repetitive
Whether any gain was made or loss avoided
Whether timely steps were taken to mitigate harm
The likely impact of the penalty on the organisation

Examples

Example 1 — Failure to Secure Data (₹250 crore) A large e-commerce platform stores millions of customer records — names, addresses, and payment details — without encryption or access controls. Hackers exploit this and steal the data. The platform had no reasonable safeguards in place. The Board finds them liable for up to ₹250 crore.

Example 2 — Failure to Report a Breach (₹200 crore) A telecom company discovers that its customer database has been compromised. Instead of notifying the Board and affected customers promptly, it delays disclosure for weeks hoping to manage the situation internally. This failure to notify attracts a penalty of up to ₹200 crore.

Example 3 — Children’s Data Violation (₹200 crore) An ed-tech platform collects data of students under 18 without obtaining verifiable parental consent. It also runs targeted advertisements directed at children on its platform. Both violations together attract a penalty of up to ₹200 crore.

Example 4 — Significant Data Fiduciary Default (₹150 crore) A major social media platform notified as a Significant Data Fiduciary fails to appoint a Data Protection Officer based in India and does not conduct its mandatory annual Data Protection Impact Assessment. The Board imposes a penalty of up to ₹150 crore.

Example 5 — Data Principal Misuse (₹10,000) An individual files repeated false complaints against a company with the Data Protection Board, with no genuine grievance. The Board finds the complaints frivolous and imposes a penalty of up to ₹10,000 on the individual.

Can the Government Go Further?

Yes. If the Board reports that penalties have been imposed on a Data Fiduciary on two or more occasions, the Central Government may direct platforms and intermediaries to block public access to that organisation’s services in India — making repeat non-compliance an existential risk for businesses.

The Key Takeaway

Penalties under the DPDP Act are not symbolic. They are substantial, scalable, and designed to deter. Compliance is not a one-time exercise — it is an ongoing obligation, and the cost of ignoring it far exceeds the cost of getting it right.

Disclaimer

The author / publisher shall not be responsible for any loss, liability, claim, penalty or consequence arising from reliance on the contents of this post without independent professional advice.

DPDP Series 1.7: Consent

May 14, 2026May 14, 2026 Karthik & Sunil#BusinessCompliance #ValidConsent, #ConsentManagement, #ConsentMatters, #CrossBorderData, #DataCompliance, #DataConsent, #DataFiduciary, #DataObligations, #DataPrincipal, #DataPrivacy, #DataProcessor, #DataSecurity, #DPDPAct, #IndiaDataLaw, #KnowYourRole, #PrivacyByDesign, #PrivacyCompliance, #PrivacyNotice, #SignificantDataFiduciaryLeave a comment

What is Valid Consent Under the DPDP Act?

Consent is the foundation of the DPDP Act. Before collecting or processing any personal data, a Data Fiduciary must obtain consent that meets every one of the following conditions. If even one condition is missing — the consent is invalid.

The Five Pillars of Valid Consent

Free — Consent must not be forced, pressured, or made a condition for a service where the data is not genuinely necessary. The individual must have a real choice.

Specific — Consent must be tied to a clearly defined purpose. A blanket “I agree to everything” is not valid. Each purpose requires its own consent.

Informed — The individual must know exactly what data is being collected, why it is being collected, and what their rights are — before they consent.

Unconditional — Consent cannot be bundled with unrelated terms or conditions. It must stand on its own.

Unambiguous with a Clear Affirmative Action — Silence, pre-ticked boxes, or inaction do not count as consent. The individual must actively and clearly say yes.

What is the Notice Requirement?

Before seeking consent, every Data Fiduciary must serve a Notice to the individual. This notice must be in clear, plain language — not buried in legal jargon. It must be available in English or any language listed in the Eighth Schedule of the Indian Constitution.

The Notice must contain:

What data is being collected — A clear description of the personal data proposed to be processed.

Why it is being collected — The specific purpose for which the data will be used.

How to exercise rights — A clear explanation of how the individual can access, correct, erase their data, or withdraw consent.

How to withdraw consent — The notice must explicitly tell the individual the manner in which they can withdraw consent. This is a distinct and mandatory element, separate from the general rights section.
The notice must make clear that consent is limited to data necessary for the specified purpose — the individual should understand they are not consenting to unlimited data collection. The notice must clarify that withdrawing consent will not affect the legality of processing already carried out before withdrawal — so individuals understand what withdrawal does and does not undo. For existing data collected before the Act, the notice obligation is triggered as soon as reasonably practicable — this timeline aspect was mentioned but could be more explicit.

How to complain — Details of how the individual can raise a complaint with the Data Protection Board of India.

Who to contact — Business contact information of the Data Protection Officer or a designated person who can answer questions about data processing.

What About Data Already Collected Before the Act?

If consent was obtained before the Act came into force, the Data Fiduciary must still issue a notice — as soon as reasonably practicable — informing the individual of the data held, its purpose, and how to exercise their rights going forward.

What Happens to Invalid Consent?

Any portion of consent that violates the Act is invalid to that extent. The rest of the consent may still hold — but the Data Fiduciary cannot rely on the invalid portion to justify processing.

A Practical Example

A food delivery app asks you to sign up. Before you proceed, it shows a notice stating: your name, phone number, and address will be used to deliver your orders. It tells you how to delete your account and who to contact for queries. You then tap “I Agree” — actively, not by default. That is valid consent.

If instead the app pre-ticks a box agreeing to share your data with advertising partners — that portion of consent is invalid.

Disclaimer

The author / publisher shall not be responsible for any loss, liability, claim, penalty or consequence arising from reliance on the contents of this post without independent professional advice.

DPDP Series 1.6: Services to Indian Individuals by Foregin Entity

May 14, 2026May 14, 2026 Karthik & Sunil#ConsentManagement, #CrossBorderData, #DataCompliance, #DataFiduciary, #DataObligations, #DataPrincipal, #DataPrivacy, #DataProcessor, #DataSecurity, #DPDPAct, #ExtraterritorialLaw, #GlobalDataPrivacy, #IndiaDataLaw, #InternationalBusiness, #KnowYourRole, #PrivacyByDesign, #PrivacyCompliance, #SignificantDataFiduciaryLeave a comment

I’m a US Citizen Providing Services to Indians. Am I Covered Under the DPDP Act?

The short answer is — Yes, very likely.

The DPDP Act, 2023 is not limited to organisations or individuals based in India. Its reach is intentionally extraterritorial, designed to protect Indian individuals regardless of where the entity collecting their data is located.

What Does the Act Say?

The Act applies to the processing of digital personal data in two scenarios:

Within India — Any personal data collected in digital form (or digitised from non-digital form) within the territory of India.

Outside India — Any processing of digital personal data outside India, if such processing is in connection with offering goods or services to individuals in India.

This second provision is what covers you directly as a US-based service provider.

Does This Apply to Me?

Ask yourself these questions:

Do you collect personal data of individuals located in India? If yes — names, email addresses, phone numbers, payment details, usage behaviour — you are processing personal data of Indian Data Principals.

Do you offer goods or services to individuals in India? If your platform, app, or service is accessible to and targeted at Indian users — even if your servers are in the US — you fall within the scope of the Act.

Do you receive payment or registrations from Indian users? If Indian individuals are signing up, subscribing, or transacting with you, you are offering services to Data Principals within India.

If your answer to any of the above is yes, the DPDP Act applies to you.

What Are Your Obligations?

As a Data Fiduciary operating from outside India, you must:

Obtain free, informed, and unambiguous consent from Indian users before collecting their data
Provide a clear notice describing what data is collected and why
Use the data only for the stated purpose
Implement reasonable security safeguards to prevent breaches
Delete the data once the purpose is served or consent is withdrawn
Report breaches to the Data Protection Board of India and affected users promptly

Are There Any Restrictions on Sending Data Back to the US?

Yes, potentially. The Central Government has the power to restrict transfer of personal data to specific countries. If India notifies the US as a restricted destination, additional compliance steps may apply before you can transfer or store Indian users’ data on US servers.

What Happens If You Don’t Comply?

Non-compliance exposes you to penalties imposed by the Data Protection Board of India — up to ₹250 crore for security failures and up to ₹200 crore for failure to report a breach. The Board has jurisdiction over processing that affects Indian Data Principals, regardless of where you are based.

Disclaimer

The author / publisher shall not be responsible for any loss, liability, claim, penalty or consequence arising from reliance on the contents of this post without independent professional advice.

DPDP Series 1.5: Data Breaches

May 14, 2026May 14, 2026 Karthik & Sunil#BusinessCompliance #DataBreach, #ConsentManagement, #CyberSecurity, #DataFiduciary, #DataObligations, #DataPrincipal, #DataPrivacy, #DataProcessor, #DataProtection, #DataSecurity, #DPDPAct, #KnowYourRole, #PrivacyByDesign, #PrivacyCompliance, #SignificantDataFiduciaryLeave a comment

What is a Data Breach?

A personal data breach under the DPDP Act, 2023 is any unauthorised processing, accidental disclosure, acquisition, sharing, use, alteration, destruction, or loss of access to personal data — that compromises its confidentiality, integrity, or availability.

In plain terms: if personal data ends up where it shouldn’t, gets changed without authorisation, or becomes inaccessible when it should be available — it is a breach.

How Does a Breach Happen?

Breaches can occur in many ways — through external attacks, internal negligence, or simple system failures.

Example 1 — Cyberattack A hospital’s patient database is hacked. Names, phone numbers, diagnoses, and medical histories of thousands of patients are stolen and published online. This is a breach of confidentiality.

Example 2 — Accidental Disclosure An HR executive accidentally emails salary slips of 500 employees to the wrong mailing list. The data was not stolen — but it was disclosed without authorisation. Still a breach.

Example 3 — Insider Threat A bank employee downloads and sells customer account details to a third party for personal gain. This is unauthorised processing — a serious breach.

Example 4 — Ransomware Attack A company’s servers are encrypted by ransomware. All customer data becomes inaccessible. Even though data was not stolen, loss of availability is a breach under the Act.

Example 5 — Third-Party Vendor Failure A Data Fiduciary shares customer data with a cloud service provider (Data Processor). The vendor suffers a security failure and the data is exposed. The Data Fiduciary remains accountable.

What Must a Data Fiduciary Do After a Breach?

The Act imposes a strict response obligation:

Notify immediately — Inform every affected Data Principal about the nature of the breach, its likely consequences, and the steps being taken to contain it.

Report to the Board — Intimate the Data Protection Board of India with full details: the root cause, timeline of events, persons responsible, mitigation measures taken, and steps to prevent recurrence.

What Are the Consequences?

Failure to implement safeguards that could have prevented the breach attracts a penalty of up to ₹250 crore. Failure to notify the Board or affected individuals attracts up to ₹200 crore — both imposed by the Data Protection Board.

The Key Takeaway

A breach is not just a hacking incident. Sending data to the wrong person, losing a device with unencrypted data, or a vendor’s server going down — all can qualify. The obligation to protect data, and to respond swiftly when things go wrong, rests squarely on the Data Fiduciary.

Disclaimer

The author / publisher shall not be responsible for any loss, liability, claim, penalty or consequence arising from reliance on the contents of this post without independent professional advice.

DPDP Series 1.4: Data Fiduciary – Obligations

May 14, 2026May 14, 2026 Karthik & Sunil#ConsentManagement, #DataFiduciary, #DataObligations, #DataPrincipal, #DataPrivacy, #DataProcessor, #DataSecurity, #DPDPAct, #KnowYourRole, #PrivacyByDesign, #PrivacyCompliance, #SignificantDataFiduciaryLeave a comment

Am I a Data Fiduciary? What Are My Obligations?

Q: How do I know if I am a Data Fiduciary?

If your organisation decides why and how personal data is collected and processed — you are a Data Fiduciary. This includes businesses, hospitals, schools, employers, apps, government bodies, and NGOs. Size does not matter; if you collect personal data of individuals in India, you qualify.

Q: Do I need consent before collecting data?

Yes. Before collecting any personal data, you must give the individual a clear notice describing what data is being collected and why. Consent must be free, specific, informed, and unambiguous.

Q: Can I collect more data than I need? No. You may only collect data that is necessary for the stated purpose. Collecting excess data is a violation of the Act.

Q: How long can I keep the data?

Only as long as the purpose requires. Once the purpose is served or the individual withdraws consent, you must delete the data — unless a law requires you to retain it for a specific period.

Q: What security measures must I put in place?

You must implement reasonable technical and organisational safeguards — including encryption, access controls, monitoring logs, and data backups — to prevent unauthorised access or breaches.

Q: What must I do if there is a data breach?

You must immediately notify the Data Protection Board and every affected individual, describing the nature of the breach, its likely impact, and the steps being taken to contain it.

Q: Must I have a grievance mechanism?

Yes. Every Data Fiduciary must establish an effective grievance redressal system and publish contact details of a person who can respond to Data Principal queries.

Q: What are the penalties for non-compliance?

Penalties can reach up to ₹250 crore for failure to implement security safeguards, and up to ₹200 crore for failure to report a breach — imposed by the Data Protection Board.

Disclaimer

The author / publisher shall not be responsible for any loss, liability, claim, penalty or consequence arising from reliance on the contents of this post without independent professional advice.

Karthik & Sunil

Chartered Accountants

#ConsentManagement

DPDP 3.1.3 – Artificial Intelligence and DPDP

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