Data Protection Impact Assessments (DPIAs) under the DPDP Act, 2023: Scope, Methodology, and Role in High-Risk Processing

Posted On - 17 October, 2025 • By - Jidesh Kumar

Executive Summary

The Digital Personal Data Protection Act, 2023 (DPDP Act in India) introduces Data Protection Impact Assessments (DPIAs) as a mandatory compliance tool for Significant Data Fiduciaries (SDFs) engaged in high-risk processing. A DPIA is a structured evaluation of potential harms to individuals arising from data processing activities, along with strategies to mitigate risks.

By requiring DPIAs, the DPDP Act places accountability at the heart of India’s privacy regime. This article analyses the statutory basis, scope, and methodology of DPIAs, compares India’s framework with GDPR, and explores practical applications across industries.

Introduction: Why DPIAs Matter

In the data-driven economy, new technologies like AI, biometric authentication, and targeted advertising create both opportunities and risks. Without prior risk assessment, these activities can lead to discrimination, exploitation, and large-scale harm.

DPIAs act as a preventive safeguard, ensuring that fiduciaries identify and mitigate risks before launching new projects. For regulators, DPIAs provide documented evidence of compliance and accountability.

Statutory Basis under the DPDP Act

  • DPIAs are mandatory for Significant Data Fiduciaries (SDFs).
  • Government may prescribe categories of processing that require DPIAs (e.g., processing sensitive personal data, large-scale profiling, use of AI in decision-making).
  • DPIAs must be submitted to the Data Protection Officer (DPO) and, if necessary, reviewed by the Data Protection Board of India (DPB).

Scope of DPIAs

A DPIA typically covers:

  1. Description of Processing: Nature, purpose, categories of data, scale.
  2. Lawful Basis Assessment: Consent, legitimate use, or statutory requirement.
  3. Risk Assessment: Potential harms to Data Principals (identity theft, discrimination, financial loss, reputational damage).
  4. Mitigation Measures: Technical, organisational, and contractual safeguards.
  5. Residual Risks: Risks that remain despite mitigation and justification for proceeding.
  6. Recommendations: Whether to proceed, modify, or abandon the project.

Methodology of DPIAs

Step 1: Initiation

  • Triggered when new high-risk processing is planned.
  • DPO initiates the DPIA process.

Step 2: Data Mapping

  • Identify what personal data will be collected, where it flows, who accesses it, and where it is stored.
  • Assess whether processing has a clear lawful basis under DPDP (consent, legitimate use).

Step 4: Risk Identification

  • Loss of confidentiality.
  • Unauthorised profiling.
  • Exclusionary practices (e.g., AI bias).

Step 5: Mitigation Measures

  • Encryption, pseudonymisation, access controls.
  • Staff training, contractual clauses with processors.

Step 6: Residual Risk Evaluation

  • Assess risks that cannot be eliminated.
  • Determine whether risks outweigh benefits.

Step 7: DPO Review

  • DPO validates the DPIA.
  • For very high-risk processing, DPO may escalate to DPB.

Step 8: Implementation & Monitoring

  • Recommendations integrated into project design.
  • Regular re-assessment for evolving risks.

Model DPIA Workflow

  1. Initiation → Business team informs DPO of new processing.
  2. Data Mapping → Catalogue data flows and systems.
  3. Risk Assessment → Evaluate harms to Data Principals.
  4. Safeguard Design → Recommend mitigation strategies.
  5. Documentation → Prepare DPIA report.
  6. DPO Review → Independent oversight.
  7. Board/DPB Filing (if required).
  8. Ongoing Monitoring → Reassess annually or on major system changes.

Role of the Data Protection Officer (DPO)

  • Supervises DPIAs for SDFs.
  • Ensures independence and objectivity.
  • Acts as the liaison with the Data Protection Board.
  • Ensures DPIA outcomes are integrated into business decisions.

Global Comparison: GDPR vs. DPDP

  • GDPR: DPIAs required for large-scale profiling, sensitive data, or systematic monitoring. Supervisory Authorities can prohibit high-risk processing.
  • DPDP: DPIAs tied to SDF classification and government notification. Board may intervene post-assessment.
  • India’s model is more centralised, giving government discretion on what constitutes “high risk.”

Sectoral Applications

Banking and Fintech

  • Use of AI in credit scoring, fraud detection, or customer profiling requires DPIAs.
  • Risks: discrimination, exclusion of vulnerable groups.

Healthcare and Health-Tech

  • Digitisation of patient records and genetic testing triggers DPIAs.
  • Risks: data breaches, misuse of health data.

Social Media and Online Platforms

  • Behavioural profiling, targeted advertising, and algorithmic recommendations.
  • Risks: manipulation, mental health impacts, misinformation.

E-Commerce and Retail

  • Personalised recommendations and loyalty programs.
  • Risks: profiling minors, unfair exclusion in pricing.

Case Studies

Case 1: Fintech Algorithm: A fintech launches an AI tool to assess loan eligibility. A DPIA reveals bias against rural borrowers due to proxy variables. Mitigation: remove biased variables, introduce human review.

Case 2: Hospital Records System: A hospital digitises medical records. DPIA identifies risk of ransomware attacks. Mitigation: encryption, offline backups, role-based access.

Case 3: Social Media Ad Targeting: Platform plans to introduce behavioural ads for teenagers. DPIA reveals profiling risks. Mitigation: disable targeted ads for minors.

Compliance Strategies

  1. DPIA Templates: Standard forms with checklists for uniformity.
  2. Training Programs: Equip business teams to identify high-risk processing early.
  3. Integration into Project Lifecycle: DPIA as a mandatory step before product launches.
  4. Documentation and Audit Trails: Maintain DPIA reports for regulatory inquiries.
  5. Independent Review: DPO or external experts validate assessments.

Risks of Non-Compliance

  • Regulatory Penalties: Up to ₹150 crore for SDF non-compliance.
  • Operational Risks: Delayed launches if DPIAs not completed.
  • Reputational Harm: Public backlash if harmful projects proceed unchecked.
  • Litigation: Class actions alleging discrimination or bias.

Conclusion & Key Takeaways

DPIAs under the DPDP Act are a preventive compliance mechanism designed to identify, assess, and mitigate privacy risks in high-risk processing.

Key takeaways:

  • Mandatory for Significant Data Fiduciaries.
  • Must be supervised by the DPO.
  • Should follow a structured methodology: data mapping → risk assessment → mitigation → DPO review.
  • Critical for high-risk sectors like banking, healthcare, and social media.
  • Strong documentation is both a compliance shield and a business enabler.

For Indian companies, DPIAs are not a box-ticking exercise, they are the foundation of privacy by design and a practical tool to balance innovation with trust.

Co–Authored by :- Aurelia Menezes