"The proposed changes raise grave concerns regarding the implications for the choice and autonomy of Indian citizens," the tech ministry said in a Jan 18 e-mail addressed to WhatsApp boss Will Cathcart, which was reviewed by Reuters.
"Therefore, you are called upon to withdraw the proposed changes."
WhatsApp's new terms had sparked criticism, as users outside Europe who do not accept the new conditions before Feb 8 will be cut off from the messaging app.
Last week, Facebook said there was "a lot of misinformation" about the update to its terms of service regarding an option to use WhatsApp to message businesses, executive Adam Mosseri said on Twitter.
"The policy update does not affect the privacy of your messages with friends or family in any way," said Mr Mosseri, who heads Instagram.
The update is about how merchants using WhatsApp to chat with customers can share data with Facebook, which could use the information for targeting ads, said the social network.
"We can't see your private messages or hear your calls, and neither can Facebook," WhatsApp said in a blog post. "We don't keep logs of who everyone is messaging or calling. We can't see your shared location and neither can Facebook."
Location data, along with message contents, is encrypted end-to-end, said WhatsApp.
"We're giving businesses the option to use secure hosting services from Facebook to manage WhatsApp chats with their customers, answer questions, and send helpful information like purchase receipts," WhatsApp said in the post.
The company also said that it would delay the new policy launch from February to May, after facing a raft of criticism over the new terms, including in its biggest market of India.
The reassurance on privacy came as WhatsApp users flocked to rivals Telegram and Signal following the tweak to its terms.