Digital Personal Data Protection Act, 2023: What CAs Must Know About Client Data Compliance in 2025

The Digital Personal Data Protection Act, 2023 represents a major shift in how personal data is regulated in India. As the country moves towards greater digitization and data-driven governance, this law seeks to protect the privacy of individuals by imposing obligations on organizations that collect, process, and store personal data. Chartered accountants, as trusted advisors and custodians of sensitive financial and personal data, must now pay close attention to how this law impacts their own practices as well as the businesses they serve. The year 2025 is particularly crucial because organizations are expected to operationalize compliance measures ahead of anticipated enforcement deadlines and penalties.

For chartered accountants, the implications of the Digital Personal Data Protection Act go beyond simply knowing the law’s provisions. The Act requires entities that collect and process personal data to ensure that data is collected only for lawful purposes, used in accordance with consent provided by the individual, and protected through reasonable security safeguards. This applies not just to large corporations but also to small and medium businesses, professionals, and firms, including CA practices. Client information such as PAN numbers, Aadhaar details, bank statements, tax filings, and salary data all qualify as personal data under the Act. When such data is processed, stored, or shared, the CA or their firm becomes a data fiduciary and is bound by the obligations of the law.

One of the key requirements under the law is that consent from individuals must be obtained in a free, specific, informed, and unambiguous manner. For CAs, this means that any personal data collected from clients must be supported by documented consent specifying the purpose for which the data will be used. Simply relying on implied consent or informal agreements will no longer suffice. Many CAs may need to update their engagement letters, data collection forms, and privacy policies to reflect these new requirements. Educating clients about why their data is needed and how it will be protected can also help build trust and demonstrate compliance.

Data security is another critical area of focus. The Act places an obligation on data fiduciaries to implement reasonable safeguards to prevent unauthorized access, misuse, or breaches of personal data. CA firms, which typically handle large volumes of sensitive data, must review their IT systems, data storage practices, and third-party service providers to ensure that appropriate security controls are in place. This could include adopting encrypted storage solutions, restricting access to client data on a need-to-know basis, using secure file transfer protocols, and maintaining logs of data access and processing activities.

In the event of a personal data breach, the law requires timely reporting to the Data Protection Board and, where applicable, informing affected individuals. CAs must therefore have in place a clear protocol for identifying, responding to, and reporting data breaches. This might require investment in training, technology, and internal policies designed to detect breaches early and manage them effectively. Given the nature of CA work, where even an inadvertent leak of sensitive client data could have serious repercussions, proactive planning and preparation are essential.

Beyond their own compliance obligations, CAs will increasingly find themselves advising clients on how to comply with the Digital Personal Data Protection Act. Many businesses, especially small and medium enterprises, will look to their CA as a first point of contact for understanding their responsibilities under the law. This creates an opportunity for CAs to add value by helping clients draft or review privacy policies, design data consent mechanisms, map their data flows, and implement internal controls that support data protection. This advisory role can extend to conducting compliance reviews or audits focused on data protection readiness, thus enhancing the CA’s service portfolio in line with emerging client needs.

It is also important to acknowledge that data protection is not merely a legal requirement but a professional obligation aligned with the core principles of confidentiality and integrity that underpin the chartered accountancy profession. The ICAI Code of Ethics has long emphasized the duty of members to protect client information from unauthorized disclosure. The Digital Personal Data Protection Act reinforces these values through a legal framework, providing CAs an opportunity to demonstrate leadership in ethical data handling practices.

Going forward, chartered accountants must stay updated on the evolving regulatory landscape of data protection. The government is expected to release detailed rules and guidelines under the Act, and the Data Protection Board will play an important role in interpreting and enforcing the law. Regularly following notifications, attending professional development programs, and engaging in peer discussions will help CAs navigate these changes confidently. For CA firms, it may also be prudent to designate a data protection lead or form a compliance working group within the firm to oversee implementation of best practices.

In conclusion, the Digital Personal Data Protection Act, 2023 brings both challenges and opportunities for chartered accountants. On one hand, it imposes new compliance obligations that require careful attention to data handling, documentation, and security. On the other hand, it provides a chance for CAs to strengthen their role as trusted advisors, helping clients build robust data protection frameworks that foster trust and compliance. By approaching this law with foresight, professionalism, and a commitment to ethical conduct, chartered accountants can contribute meaningfully to India’s vision of a secure and privacy-respecting digital economy.

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