The government is likely to propose a penalty of up to Rs 500 crore for violating provisions of the Digital India Bill, according to sources.

Under the proposed bill, the Centre may authorise any government agency to monitor and collect traffic data generated, transmitted, received or stored in any digital system to enhance cyber security.

It also aims to identify, analyse and prevent intrusion or spread of malware or virus.

The Ministry of Electronics and IT (Meity) has been working on the draft of the Digital India Bill to replace the existing IT Act which was enacted more than 22 years ago in the early days of internet.

"The Digital India Bill may come with a provision of a penalty of up to Rs 500 crore on entities for breach of obligations," according to the source.

The quantum of penalty will be decided by the proposed Digital India Authority that will handle grievances, the sources said.

However, the authority may have to asses various factors, such as the gravity, number of users affected and the duration for which an individual was affected, before taking a final decision on the penalty amount.

Disputes under the proposed Act are unlikely to come under the jurisdiction of civil courts and entities unsatisfied with the resolution provided by the Digital India Authority might have the option to challenge it before the Supreme Court, the sources said.

The proposed bill is likely to identify and define various kinds of damage a victim is likely to face in the digital world, they said.

It is likely to define doxing, cyber squatting, astroturfing, dog whistling, among other offences, and make them punishable. The bill is likely to come up with norms to control development and deployment of emerging technologies in the wake of challenges being posed by development of artificial intelligence, the sources added.

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