Introduction

India’s journey toward a nationwide Digital Identity system centered on Aadhaar has been one of the most ambitious public-sector technology projects in modern history. With over 1.43 billion Aadhaar numbers issued, Aadhaar now touches nearly every aspect of citizens’ interaction with the government and many private services. This scale brings enormous benefits in the delivery of welfare, financial inclusion, and administrative efficiency, but it also raises complex questions about privacy, misuse, cyber-fraud, and the proper legal framework for Aadhaar-linked services.

This article examines the current legal framework around Aadhaar-linked services, evaluates the privacy and security risks associated with a national Digital Identity, surveys notable incidents of misuse and leakage, and discusses the contested distinction between mandatory and voluntary use of Aadhaar. Where relevant, recent laws, policy changes, and court rulings are cited to make the analysis factual and actionable.

What is a Digital Identity, and why Aadhaar matters

A Digital Identity is an electronic representation of an individual’s identity attributes (name, date of birth, biometrics, etc.) that can be used to authenticate and authorize access to services. Aadhaar, issued by the Unique Identification Authority of India (UIDAI), is India’s foundational Digital Identity: a 12-digit unique identifier linked to biometric and demographic data, intended to reduce duplication, curb subsidy leakages, and enable easier public-service access. As of mid-2025, UIDAI reports over 1.43 billion Aadhaar numbers generated.

Aadhaar’s centrality in India’s governance architecture has made it the de facto method of identity verification in numerous sectors, from banking KYC to public distribution systems, creating a huge ecosystem of Aadhaar-linked services that rely on central authentication. This interdependence heightens both the promise and the risk of the Digital Identity model.

The statutory legal framework governing Aadhaar

The statutory backbone for Aadhaar is the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016, subsequently amended by the Aadhaar and Other Laws (Amendment) Act, 2019. The 2019 amendments clarified issues such as offline verification and regulated how certain entities may perform authentication; they also emphasized the need for consultation with UIDAI and the relevant sectoral regulators for expanding authentication functions.

Crucially, the Supreme Court’s landmark judgment in Justice K.S. Puttaswamy v. Union of India (September 26, 2018) upheld the constitutional validity of Aadhaar for specified purposes (welfare delivery and state schemes) while striking down or restricting other uses. The judgment established privacy as a fundamental right under Article 21, and directed proportionality and safeguards where state action touches personal data, setting an important constitutional constraint on any future Aadhaar-linked expansions.

Since 2023, India has also enacted a new data-protection statute, the Digital Personal Data Protection Act, 2023 (DPDP Act), which provides a statutory regime for processing digital personal data. The DPDP Act seeks to regulate obligations of data fiduciaries and impose penalties for misuse, a complementary layer to Aadhaar-specific rules that affect Aadhaar-linked services because much Aadhaar processing is, by design, digital.

Privacy concerns: why a Digital Identity is sensitive

A centralized Digital Identity like Aadhaar aggregates demographic and biometric attributes at a massive scale. The privacy concerns fall into four main buckets:

• Surveillance and Function Creep: When a single identifier is used across services, it becomes possible to correlate records and build comprehensive profiles of citizens’ activities, raising the risk of state and non-state surveillance beyond the original policy intent. The Supreme Court warned against unchecked function creep and demanded proportionality in use.
• Data Security and Breach Risk: Large identity repositories are attractive targets. Multiple instances of alleged data exposure and aggregation vulnerabilities involving Aadhaar-related data have been reported over the years, causing public alarm and debates about the robustness of the protections in place.
• Consent and Autonomy: The question of whether citizens have meaningful choice about linking Aadhaar to services (versus coerced linking for access) raises concerns about informed consent — especially for vulnerable populations less able to exercise alternatives.
• Exclusion Risks: Errors in biometric authentication, deactivation of Aadhaar numbers (for example, of deceased individuals to prevent misuse), or lack of enrollment documentation can lead to wrongful denial of benefits, an exclusionary effect often faced by marginalized groups. Recent UIDAI clean-up efforts, such as deactivating Aadhaar numbers of deceased individuals, aim to reduce misuse and also reveal systemic challenges.

These issues demonstrate that a Digital Identity system requires a robust rights-based legal framework, strong technical safeguards, and continuous auditing.

Documented misuse and cyber-fraud involving Aadhaar-linked services

Over the past several years, multiple reports have revealed that various government portals exposed data and that aggregated personal information appeared in public or third-party repositories. UIDAI has consistently stated that no breach has occurred in the central Aadhaar database. However, vulnerabilities in peripheral systems and poor data handling by third parties have repeatedly created risks. Investigations and media reports have documented cases where beneficiary lists, bank account linkages, and other demographic information became accessible. In some instances, actors allegedly posted this data on the dark web.

Cybercriminals exploit weak authentication or enrolment checks in Aadhaar-linked processes by using identity information for SIM swaps, false KYC with forged documents, and SIM cloning with leaked demographic data. The proliferation of digital services that accept Aadhaar as an identity token means attackers have multiple potential vectors, from phishing for one-time passwords (OTPs) to social engineering officers tasked with remote KYC.

In response, UIDAI and regulators have introduced tougher enrollment norms, fraud-detection protocols, and offline verification modes, and have pursued legal actions against entities and individuals accused of exposing citizen data. Though these steps help, the systemic risk remains as long as large volumes of identity-linked data are processed across diverse public and private actors.

Mandatory vs Optional Use: the constitutional and policy balance

The debate over when Aadhaar can be made mandatory is central to the governance of Aadhaar-linked services. The Supreme Court’s 2018 judgment allowed mandatory Aadhaar for subsidies and welfare schemes where the state has a legitimate need to prevent leakages and ensure targeted delivery, essentially a proportionality test. However, the Court struck down or limited mandatory linkage in contexts where the state could not justify the intrusion (for example, school admissions, private employment) and emphasised that for private purposes, alternatives must be available.

Parliament’s 2019 amendment and subsequent policy moves have tried to strike a balance by allowing Aadhaar as proof of identity and enabling offline modes of verification, while also stating that no one should be denied services for non-linkage where alternative identity documents exist. Nonetheless, in practice, many citizens experience indirect coercion when services or procedures implicitly demand Aadhaar authentication, a friction point that continues to generate litigation and policy debate.

Policymakers must keep Aadhaar voluntary in areas that require protection of privacy and individual choice, while making it mandatory only where clear public interest exists, and statutory safeguards, oversight, and redress mechanisms support its use.

How the legal framework and new data laws interact

The introduction of the DPDP Act, 2023, creates an overarching statutory regime for digital personal data that impacts all Aadhaar-linked services (since most Aadhaar processing is digital). The DPDP Act sets obligations for lawful processing, purpose limitation, data minimisation, and security safeguards. The Aadhaar Act and UIDAI rules directly govern Aadhaar use and create a two-layer compliance system, requiring organisations to align sectoral rules and UIDAI regulations with the DPDP Act’s principles.

Important legal features that service providers and public bodies must pay attention to include:

• Data minimisation and storage limitation: Peripheral entities should avoid storing Aadhaar numbers or sensitive biometric data unless expressly permitted. UIDAI has long emphasised that only tokenised or limited data should be retained by third parties.
• Purpose limitation: Organisations must use Aadhaar authentication strictly for the specified purpose, and any reuse beyond that purpose may trigger legal challenges.
• Accountability and redress: UIDAI and the data protection authorities under the DPDP Act must address data breaches and misuse through established mechanisms and impose penalties when organisations violate their obligations.

This layered regulatory environment heightens compliance burdens for private companies offering Aadhaar-linked services, while giving citizens clearer statutory grounds to seek redress.

Technical and policy measures to limit misuse and fraud

Effective protection of a national Digital Identity requires both legal controls and technical standards. Key measures include:

1. Tokenisation & Virtual IDs: Replacing plain Aadhaar numbers with temporary, revocable virtual identifiers reduces exposure risk when services store or process identity references.
2. Offline and Local Verification: Allowing secure offline verification that does not transmit biometric data to a central repository reduces breach vectors.
3. Stronger Authentication Practices: Multi-factor authentication, anomaly detection for transaction patterns, and rate-limiting of OTPs and authentication attempts can deter social engineering and automated attacks.
4. Audit Trails & Transparency: Mandating logs of authentication events, with citizen-accessible reports showing which entities accessed their Aadhaar for what purpose, strengthens accountability.
5. Regulatory Oversight & Certification: A certification regime for enrollment agencies, periodic security audits, and clear sanctions for data mishandling will incentivize compliance.

UIDAI and the 2019 amendments already incorporate several of these concepts, but authorities still need to ensure strong implementation and enforcement.

Benefits of the Aadhaar-Linked Digital Identity System

The shift to Aadhaar-linked authentication has offered many advantages, including:

✔️ Faster service delivery: Authentication time reduced from days to seconds.

✔️ Reduced corruption and identity fraud: Direct transfers reduced duplicate beneficiaries. Government reports state savings of over ₹90,000 crore through Aadhaar-based monitoring.

✔️ Financial inclusion: Aadhaar links over 550 million Jan Dhan bank accounts and gives millions digital access to banking.

✔️ Improved accessibility: Citizens can verify identity using OTP, biometrics, or QR codes—without needing physical documents.

While the benefits are significant, the system also raises privacy, surveillance, and misuse concerns.

Recommendations: Building trust for Aadhaar-linked Digital Identity

To preserve the benefits of a Digital Identity system while upholding rights and minimising fraud, policymakers and stakeholders should prioritize:

• Clear statutory boundaries for mandatory use: Require detailed justification, legislative backing, and sunset clauses for any extension of mandatory Aadhaar linkage.
• Stronger data protection enforcement: Operationalize the DPDP Act with an independent regulator equipped to audit, fine, and remediate breaches involving Aadhaar-linked processing.
• Universal alternatives & grievance redress: Authorities must provide simple, accessible alternatives to Aadhaar and establish fast, effective grievance redress systems for authentication failures or exclusion.
• Public awareness campaigns: Educate citizens on the safe use of their Digital Identity, how to protect OTPs, and how to check authentication logs.
• Interagency coordination: Harmonize UIDAI rules, sectoral regulators (RBI, TRAI, etc.), and the data protection authority to ensure consistent standards across Aadhaar-linked services.

Conclusion

Aadhaar has transformed India’s approach to identity and service delivery, demonstrating the power of a universal Digital Identity to improve inclusion and efficiency. Yet the widespread adoption of Aadhaar-linked services places intense responsibility on policymakers, UIDAI, private providers, and courts to maintain a robust legal framework that protects privacy, prevents misuse, deters cyber-fraud, and respects voluntary choice where appropriate.

The twin pillars of constitutional protection (as articulated by the Supreme Court) and modern data-protection legislation (the DPDP Act) provide a strong foundation, but implementation, enforcement, and technological safeguards will determine whether Aadhaar continues to be a vehicle for empowerment or a source of risk. Striking the right balance will require ongoing legal vigilance, transparent governance, and a sustained commitment to citizens’ rights.

References:

• https://uidai.gov.in/images/news/Amendment_Act_2019.pdf?utm_source
• https://www.business-standard.com/india-news/aadhaar-enrolment-new-uidai-norms-verification-fraud-checks-125071100821_1.html?utm_source
• https://www.meity.gov.in/static/uploads/2024/06/2bf1f0e9f04e6fb4f8fef35e82c42aa5.pdf?utm_source
• https://www.ey.com/en_in/insights/cybersecurity/decoding-the-digital-personal-data-protection-act-2023?utm_source
• https://www.huntress.com/threat-library/data-breach/aadhaar-data-breach?utm_source