It is an undisputed fact that organisations must effectively communicate their Personal Data collection and use practices to the persons from whom they collect that Personal Data, aka the Data Principals. How Personal Data is collected and processed is not a mere internal governance question, but a legal imperative. But paradoxically, it is also the document most likely to be forgotten: drawn up and forgotten, never to be seen again.
As the Digital Personal Data Protection Act, 2023 [“DPDP Act”], and the accompanying 2025 Rules [“DPDP Rules”] transition toward enforcement, shifting from vague, boilerplate disclosures to absolute transparency is a matter of strategic necessity for organisations. Achieving this requires drafting an essential document: the Privacy Policy, which forms one of the most significant parts of an organisation’s data governance framework.
A Privacy Policy refers to the document that comprehensively explains to Data Principals how they collect, store, process, or otherwise use their Personal Data. Essentially, it is a legal document through which an organisation specifies what information it gathers, what it does with it, where it keeps it, who it gives its access to and how it protects it.
Therefore, it is imperative to note that a Privacy Policy is not a “one size fits all” document. It is not merely a legal formality, but a clear, accessible declaration of an organisation’s data processing lifecycle. In simpler terms, it can be understood as the bridge of trust between a business and its consumers.
It is a transparency tool which must be made readily available to all users. Its core function is to provide an easily comprehensible summary of an organisation’s processing activities. It assists organisations to build user confidence, properly obtain valid consent, and follow the principles of accountability and transparency.
TYPES OF PRIVACY POLICIES
A Privacy Policy is primarily a tool of transparency in ensuring that a Data Principal knows what is being done with his/her data, and on what basis. Accordingly, an organisation would generally have to look at two different categories:
I. An External Privacy Policy is a public-facing document directed at third parties, including customers, clients, and other Data Principals, whose Personal Data the organisation collects. It is typically published on the organisation's website or application and made accessible before or at the point of data collection. This document is the cornerstone of the organisation's notice and consent obligations under the Act.
II. An Internal Privacy Policy refers to the corporate document intended for internal stakeholders, including employees, contractors, and other individuals who handle Personal Data as part of their jobs. This policy document specifies the procedures and controls required by the organisation when it comes to accessing, handling, and classifying personal information, as well as the penalties involved when there is any contravention
SIGNIFICANCE AND LEGAL BASIS OF PRIVACY POLICIES
Publishing and maintaining an up-to-date Privacy Policy forms the foundation of an organisation’s Personal Data privacy and protection. It is necessary to ensure accountability and compliance by providing evidence that the Data Principal has been properly informed before their Personal Data is handled.
The DPDP Act and Rules also describe the legal obligation to maintain such disclosures through various provisions:
Sections 5 and 6 of the DPDP Act, read with Rule 3 of the DPDP Rules, specify that Personal Data can be processed solely for a lawful purpose, and only when free, specific, informed, and unambiguous consent has been obtained from the Data Principal. Every request for Consent by a Data Fiduciary must be accompanied or preceded by an itemised notice. This notice must specify [in clear and simple language] the type of Personal Data that is being collected, the purpose for which it is being collected and with whom it is shared.
The communication must be clear, plain, and provided in English or any language specified in the Eighth Schedule to the Constitution of India, of which the Privacy Policy serves as the foundational text.
A Privacy Policy establishes the detailed framework that supports this notice, ensuring the organisation does not overstep the specifications previously laid down by them. A Privacy Policy that obscures material information, buries important terms in dense legalese, or makes withdrawal of consent unduly cumbersome will not satisfy the standard the Act demands.
Under Section 8 of the DPDP Act, Data Fiduciaries are required to maintain clear policies to inform Data Principals of the rights available to them under the DPDP Act and Rules, and how they can exercise these rights, including the withdrawal of Consent and grievance redressal. Section 8 further places a range of obligations on Data Fiduciaries, including the duty to ensure the accuracy and completeness of personal data, to implement appropriate technical and organisational security measures, to establish a grievance redressal mechanism, and to retain personal data only for as long as it is necessary for the specified purpose. Each of these obligations should be reflected in the organisation’s privacy policy to demonstrate compliance.
Further, organisations designated as Significant Data Fiduciaries [“SDFs”] under the DPDP Act and Rules are subject to additional obligations, including the appointment of a Data Protection Officer and the conduct of periodic Data Protection Impact Assessments. Accordingly, for organisations categorised as SDFs, their Privacy Policy must acknowledge these obligations and provide the relevant contact details for the Data Protection Officer.
The DPDP Act also details significant penalties for non-compliance with its requirements. Failure to implement reasonable security safeguards resulting in a data breach, for example, can attract a penalty of up to ₹250 crore. A robust Privacy Policy, which is also properly implemented, is one of the most effective tools an organisation has to reduce this exposure.
Through a Privacy Policy, an organisation is able to communicate its commitment towards data protection. Lack of transparency through the Privacy Policy can result in the erosion of organisational trust. Further, by laying down the rules for internal handling of customer data and how it can flow, the Privacy Policy helps in minimising risks of data breaches and regulatory issues. A Privacy Policy and, when supported by good internal data governance measures, shields the business from both regulatory action and reputation damage.
WHAT MUST A PRIVACY POLICY CONTAIN?
Essentially, a Privacy Policy is the public record of all parameters related to the user-facing data processing lifecycle of an organisation, from the stage of collection to erasure, including the reasons for its use and how the data may be shared.
In line with this, it must ideally include [at the minimum]:
- The specific categories of Personal Data being collected and processed,
- The lawful purpose and legal bases for processing of the Personal Data,
- The manner in which Data Principals may exercise their rights [including the right to correction, completion, updating, and erasure],
- The manner in which Data Principals may withdraw their Consent,
- The name and contact particulars of the designated Grievance Officer, or the Data Protection Officer [in case of an SDF],
- The escalation matrix of the organisation and the mechanism for grievance redressal and how a complaint can be escalated to the Data Protection Board,
- The period and purposes of Data retention,
- The technical and organisational security measures taken for Data protection,
- The Data Breach measures and notification mechanism, and
- Data sharing and the transfers of Personal Data abroad [cross-border data transfers].
HOW TO DRAFT A PRIVACY POLICY
At the outset, it is pertinent to note that a Privacy Policy is a document that requires continuous review, management and revision. That is to say, it is not a permanent document made once, but rather a record that should be considered “dynamic” and must, therefore, be regularly updated and reviewed to ensure that the information accurately reflects the internal processing reality. This is also necessary for compliance and effective risk management.
The following steps should be followed to maintain effective Privacy Policies [both internal and external]:
I. Personal Data Collection and Processing Particulars
- Firstly, the step[s] taken to ensure that clear and informed consent was obtained from the Data Principals [Consent Notice, essentially] must also be detailed.
- Following this, all the types of Personal Data collected, processed, and therefore covered under this Policy must be specified.
- Further, all the Personal Data collection must be clearly categorised [the “Categories of Personal Data”] in simple terms. The way[s] of Personal Data collection should also be specified.
- This should be followed by clearly specifying the “Purpose” of processing for each category of Personal Data.
- Further, the organisation’s “Legal Bases” for processing under the DPDP Act must be specified. For example:
- If relying on the user's agreement, the category of “Consent” would be applicable.
- If relying on voluntary disclosure or compliance with legal judgments, the category of “Certain Legitimate Uses” would be applicable.
II. Specifying User Rights and Erasure
- At this stage, it is essential to specify the “Data Principal Rights” available to them as under the DPDP Act.
- In line with this, the “Procedure” for exercising these Rights must be explained.
- 6. Further, the “Withdrawal Procedure” must also be specified to explain exactly how a user can withdraw their Consent with the same ease with which it was given.
- If cookies or similar technologies are used, explain the types of cookies utilised, their purpose, and the methods available for users to manage their preferences must also be specified.
III. Personal Data Retention and Erasure
The DPDP Act mandates the erasure of Personal Data as soon as the purpose for collection is fulfilled, or if the Data Principal requests such erasure, whichever is sooner. However, such Personal Data may be retained to comply with applicable law.
- Consequently, the “Retention Period” of the Personal Data must be clearly stated, as per the category of the Data.
- Further, the “Retention Justification” must also be specified. For example, Personal Data may be retained to comply with legal requirements.
IV. Data Sharing and Cross-Border Transfers
- The “Protocol for Data Sharing/ Transfer” to Data Processors/third parties in India or abroad must be specified.
- Additionally, a brief description of the protective measures for Personal Data shared or processed within India or abroad may be added.
V. Security Measures and Breaches
The DPDP Act also mandates that Data Fiduciary [and Data Processors] must undertake reasonable security safeguards to ensure the protection of Personal Data they possess.
- Based on the data category, a brief description of the “Security Measures” taken to protect the Personal Data must be provided. For example, for payments and invoicing, “Financial Transactions Procedure: describes issuing invoices, managing payments, and ensuring accounting compliance” may be added.
- Similarly, the “Obligations of the Data Processors” [especially related to safely handling Personal Data] may also be added.
- Additionally, specify if the Personal Data has been used for “Profiling” and “Automated Decision Making”. If it has, a brief description of the same should be added; otherwise, it should be answered as “None”.
VI. Grievance Redressal and Escalation Matrix
The DPDP Act mandates that every Data Fiduciary must establish an effective mechanism to address the grievances of Data Principals.
- Consequently, the “Grievance Officer Details” must be prominently displayed within the Policy. In case the organisation is classified as an SDF, the particulars “Data Protection Officer” must be specified in lieu of a standard Grievance Officer.
- Further, the “Complaint Procedure” must also be specified. For example, a clear explanation of how the user can contact the officer [via email, portal, or physical address] and the expected timeframe for resolution must be added.
- Additionally, the hierarchy of grievance redressal [“Escalation Matrix”], and the procedure for escalating unresolved issues to the Data Protection Board of India [as a right under the DPDP Act] must be specified.
VII. Additionally
- Further, the Policy must specify that Personal Data, may be shared [even without notification] to the Governmental and Law Enforcement Agencies, as and when requested by them, in line with the DPDP Act and Rules.
- The manner in which the organisation may amend the Policy and how customers or users will be informed of any substantive changes to the Policy, must also be specified.
A well-prepared and regularly updated privacy policy can become a valuable way of establishing trust, minimising legal risks and encouraging responsible handling of data. A clear and effective Privacy Policy is a strong indicator of an organisation taking its privacy and data protection obligations seriously.
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