Security deposit rules in India: how much a landlord can hold, the refund timeline, and what to do when it isn't returned

Most tenancy disputes in India are not about the rent during the tenancy — they are about the security deposit at the end of it. A tenant hands over one to several months' rent at move-in, and the argument begins at move-out, when the landlord returns a reduced amount, or nothing, citing repairs, cleaning or dues. Whether that deduction is legitimate turns on two questions most tenants never settle in writing: how much deposit the landlord was entitled to hold, and what the landlord is allowed to keep. In most of the country there is no fixed statutory cap and no fixed statutory refund date — both are governed by the agreement — so the written terms, not a general 'rule', decide who prevails. Knowing what a landlord can and cannot deduct changes the negotiation before a single rupee is withheld.

How much a landlord can ask for

There is no single national ceiling on a residential security deposit in India. The figure buyers see quoted online — two months' rent for a residential let and up to six months' rent for a non-residential (commercial) let — comes from the Model Tenancy Act, 2021, which caps the deposit at those amounts. The Model Tenancy Act is a template the central government circulated for states to adopt; it is not a law in force nationwide. Housing and tenancy are state subjects, so the cap binds a landlord only in a state that has enacted its own aligned tenancy law. As of 2026, per the Ministry of Housing and Urban Affairs, only a handful of states — including Tamil Nadu, Uttar Pradesh, Andhra Pradesh and Assam — have adopted or notified a version.

Outside those states, the deposit is a matter of local market practice and whatever the agreement records. It varies sharply by city — a one-to-two-month deposit is common in the north, while parts of the south have historically demanded six to ten months of rent. None of that is fixed by statute in a state that has not adopted the Model Tenancy Act, so the amount is negotiable and the only protection a tenant has is the number written into the agreement.

When the deposit must come back

The refund timeline, like the cap, is contractual in most of India rather than a fixed statutory number. The agreement should state exactly when the deposit is returned — commonly at handover of vacant possession, or within a defined number of days of the tenant moving out and clearing dues — and what deductions are permitted. Where a state has adopted the Model Tenancy Act framework, the deposit is refunded at the time the landlord takes over vacant possession, after due deductions. Elsewhere, if the agreement is silent on timing, there is no default statutory date to fall back on — which is why a vague or verbal understanding is where deposit disputes are born.

Interest on a delayed refund is not governed by a uniform national rule either. Some agreements provide for it and some state tenancy laws address it, but a tenant should not assume an automatic statutory interest entitlement exists everywhere. The safest position is to write the refund window, the permitted deductions and any late-return consequence into the agreement itself. For why that written agreement matters, and how registration strengthens it, see PropWatch's companion piece on the 11-month rent-agreement convention.

What a landlord can and cannot deduct

The recurring fight at move-out is over the line between legitimate deductions and the cost of ordinary use. A landlord may set off genuine, documented liabilities against the deposit, but may not convert it into a fund for restoring the property to a better state than it was let in, or for wear that any normal occupation produces.

Deductions a landlord can usually make:

• Rent that remains unpaid for the tenancy period.
• Unpaid utility bills the tenant was liable for — electricity, water, gas, piped connections — and any unpaid maintenance or society dues.
• The cost of repairing damage beyond normal wear and tear — a broken fitting, a cracked basin, a burnt countertop, a damaged door.
• Cleaning or removal costs where the tenant leaves the premises in a condition materially worse than agreed, or leaves goods behind.
• Any other charge the agreement expressly makes the tenant liable for, provided it is documented.

Deductions a landlord generally cannot make:

• Normal wear and tear — faded paint, minor scuffing, worn flooring and fittings that age with ordinary use.
• Repainting the walls as a matter of routine turnover, where fresh paint was not part of the agreed handover condition.
• Upgrades or improvements that leave the property better than it was let — new fittings replacing functional old ones.
• Vague or lump-sum 'maintenance' or 'depreciation' charges with no itemised basis or supporting bill.
• Amounts exceeding any deposit cap or deduction limit set by a state tenancy law where one applies.

What to do when the deposit is not returned

If a landlord withholds the deposit without a documented, legitimate basis, the escalation runs from a paper trail to a formal remedy. Each step raises the pressure and builds the record a court or forum will later look at.

1. Make a written demand. Send a dated message or email itemising the deposit paid, any rent or dues legitimately owed, and the net amount claimed, with a clear deadline for return. Keep it factual.
2. Gather the evidence. Assemble the agreement, deposit payment proof, move-in and move-out photographs or inventory, and utility and maintenance clearances that show no dues are outstanding.
3. Serve a legal notice. If the demand is ignored, a formal legal notice through an advocate sets out the claim and a final deadline, and signals that litigation will follow. Many withheld deposits are returned at this stage.
4. File before the appropriate forum. If the notice fails, the practical remedy depends on the state. Where a state has set up a rent authority or rent court under its tenancy law, the dispute goes there; elsewhere the usual routes are a civil suit for recovery of money, or a consumer complaint where the letting can be framed as a deficient service. An advocate can identify the correct forum and monetary jurisdiction for your state and amount.

SourcePRS Legislative Research — The Model Tenancy Act, 2021 (deposit cap and refund provisions)

SourceMinistry of Housing and Urban Affairs — The Model Tenancy Act, 2021 (official text)

SourcePropWatch — Why Indian rent agreements are for 11 months: the registration rule and stamp duty