A differential protection system is provided. The differential protection system includes a local terminal (102) configured to be communicatively coupled directly or indirectly with at least two remote terminals (104) via at least three communication links to form a ring topology or a mesh topology. The differential protection system further includes a controller (122,124,126) comprising a communication link decision unit (308) and a clock unit (310) associated with the local terminal (102). The communication link decision unit (308) is configured to determine some of the at least three communication links as virtually disconnected such that the ring topology or the mesh topology is configured to be converted to a daisy chain topology. The clock unit (310) is configured to time synchronize the local terminal (102) with at least one of the at least two remote terminals (104) when the local terminal (102) and the at least two remote terminals (104) are configured in the daisy chain topology.