The Union Cabinet has approved amendments to the Information Technology Act, 2000, aimed at checking information theft and online fraud.
The new provisions include greater emphasis on digital signatures, new security practices and procedures for e-governance and other technology applications.
The new provisions, which will apply to corporates and other organisations, will be tabled in Parliament during the winter session. The decision follows Prime Minister Manmohan Singh's assurance to investors abroad that India was sensitive to their concerns about data theft and would plug loopholes.
"Concerns have been raised within the country and by customers abroad regarding the adequacy of data protection and privacy laws in the country," Parliamentary Affairs Minister PR Dasmunshi said while briefing reporters on the Cabinet meeting on Monday.
"Thus, there is a need to strengthen legislation on data protection and privacy," he said.
The amendments were aimed at preventing computer misuse like video voyeurism, identity theft, e-commerce frauds like phishing, frauds on online auction sites, sending offensive e-mails and multimedia offences, Dasmunshi said.
In line with the recommendations made by the United Nations Commission on International Trade Law, a model law on electronic signatures, an effort will be made to promote development of alternative technologies for authentication of electronic records.
An added benefit will be that frequent legislative changes will not be needed each time a new and equally effective technology is evolved.
Welcoming the government's decision, the National Association of Software and Services Companies said: "We have been working closely with the government to evolve these recommendations that will further strengthen the Indian IT Act, 2000, and secure the legislative framework for security practices in the Indian business process outsourcing industry.
"We understand that these amendments have incorporated most of the recommendations, and are hopeful that this will lead to better handling of cyber crime by enforcement authorities."
"The proposed amendments in the Act are aimed at checking incidences of data pilferage, which threaten India's image as an outsourcing destination," said Tanmoy Chakrabarty, vice-president and head of global government industry group of Tata Consultancy Services.
HCL Technologies Ltd BPO services Chief Executive Officer N Ranjit said more effective implementation of the provisions was required, adding that those who investigate such crimes should be technically aware.