Security deposit rules in India: what a landlord can actually deduct (2026)
The security deposit is the single most disputed part of renting in India, and it is almost never disputed over the law. It is disputed because a tenant who handed over five months’ rent gets a smaller number back with no explanation attached, and has no way to tell a fair deduction from an arbitrary one.
This guide covers what you can take, when you must return it, and where the line sits between damage and wear and tear — the distinction that decides most arguments.
How much deposit can a landlord take?
There is no single national cap. This is the part most articles get wrong, so it is worth being precise.
The Model Tenancy Act 2021 caps the deposit at two months’ rent for residential premises and six months’ for commercial. But it is a model law: the Centre approved it in June 2021 and circulated it to the states, and it binds only where a state has actually enacted it. As of July 2026 only a small minority have — Assam, Andhra Pradesh, Tamil Nadu and Uttar Pradesh among them.
For most of the country, then, the deposit is governed by the tenancy agreement and the state’s own rent legislation. That is why the practice varies so widely:
| Where | Typical deposit | What governs it |
|---|---|---|
| Bengaluru | 6–10 months’ rent | Agreement; market practice, not a statutory cap |
| Delhi NCR, Mumbai, Pune | 1–3 months’ rent | Agreement; local norm |
| Chennai, Hyderabad | 2–6 months’ rent | Agreement; Tamil Nadu’s rent law follows the model framework |
| States that adopted the MTA | 2 months (residential) | Statutory cap |
Ranges are common market practice as of mid-2026, not legal limits. Check your own state before quoting a number at anyone.
When must the deposit be refunded?
Under the Model Tenancy Act, within one month of the tenant vacating, after lawful deductions. Where the Act does not apply, the deadline is whatever your agreement specifies — and if the agreement is silent, one month is the standard people reasonably expect.
A practical point that saves a great deal of trouble: send the itemised statement before you send the money. A tenant who receives the breakdown first can query a line while it is still open. A tenant who receives a smaller transfer with no explanation has already decided you are being unfair before you get a chance to explain.
What a landlord can deduct
- Unpaid rent up to the move-out date, including any prorated final month.
- Unpaid bills — electricity, water, gas, society maintenance or other dues left outstanding. Take final meter readings on handover day.
- Rent in lieu of short notice, where the agreement sets a notice period the tenant did not serve. This is a calculable amount, not a penalty.
- Repairing damage the tenant caused, at documented cost.
- Contractual charges the agreement provides for, such as an agreed end-of-tenancy deep clean — provided they were agreed in writing at the start, not invented at the end.
What a landlord cannot deduct: normal wear and tear
This is where most deposit disputes actually live. Normal wear and tear is not deductible. A property ages because someone lived in it, and that cost belongs to the owner, not the tenant.
The test is not how bad something looks. It is whether the deterioration came from ordinary use over time or from misuse, negligence or accident.
| Wear and tear (landlord’s cost) | Damage (deductible) |
|---|---|
| Paint faded or dulled after two or three years | Walls stained, drawn on, or holed for heavy fittings |
| Minor scuffs where furniture stood | Gouges, burns or cracked tiles and sanitaryware |
| Hinges loosening, tap washers wearing out | Doors forced, locks broken, taps snapped off |
| Grout darkening, general ageing of fittings | Mould from unreported leaks left to spread |
| An appliance failing at the end of its life | An appliance broken by obvious misuse |
The painting question
Painting is the most contested line in Indian tenancies, and the honest answer is that it depends on two things.
Routine repainting between tenants is maintenance. Refreshing a flat so it shows well for the next tenant is a cost of letting property, and deducting it from a deposit purely because the tenancy ended is weak.
It becomes a fair deduction when either:
- the agreement expressly provides for it — many Indian agreements do, and a clearly worded clause agreed at the start is enforceable in a way an afterthought is not; or
- the walls need work beyond what their age explains — heavy staining, crayon, holes, damp from a leak the tenant never reported.
Even then, deduct the documented cost of the actual work, not a standard flat charge applied to everyone. And if the flat was last painted four years ago, expect a reasonable tenant to argue that some of that cost was yours anyway.
When the deductions exceed the deposit
Occasionally the damage and dues come to more than you hold. The balance becomes an amount the tenant owes rather than a refund, and it is recoverable in principle — but only realistically if every line is documented. Dated photographs, invoices and quotes, not estimates. Treat it as a claim you may have to prove, and expect it to be challenged.
How to settle a deposit so it never becomes a dispute
Four habits remove almost all of the risk:
- Photograph everything at move-in, dated, and share the set with the tenant so it is agreed rather than asserted. A deduction without a “before” is very hard to defend.
- Inspect together at move-out, with the tenant present. Disagreements found in the flat get resolved in the flat; disagreements found later get resolved by lawyers.
- Take final meter readings on handover day and settle the bills against them, rather than guessing.
- Give an itemised statement, not a net figure. Every deduction as its own line, with the amount and the reason.
That last one is the whole game. You can produce one free with our deposit settlement calculator — enter the deposit and each deduction, and it generates a PDF statement you can hand the tenant. No sign-up, and it works whether or not you use Nestwise.
What a tenant can do if the deposit is not returned
Escalate in order, keeping everything in writing:
- A written demand with a specific deadline, by email or message so it is timestamped.
- A formal legal notice through a lawyer. A significant share of deposit matters settle at this step.
- The appropriate forum — a Rent Authority in states that have adopted the Model Tenancy Act, otherwise a civil suit for recovery of money, and in some circumstances a consumer forum.
These are decided on documents. The agreement, rent receipts, the move-in photographs and the handover messages are what determine the outcome — which is the same reason a landlord benefits from keeping them.
Frequently asked questions
How much security deposit can a landlord legally take in India?
There is no single national cap. The Model Tenancy Act 2021 limits it to two months' rent for residential premises and six months' for commercial, but that Act binds only in the states that have enacted it — as of July 2026 that is a small minority, including Assam, Andhra Pradesh, Tamil Nadu and Uttar Pradesh. Everywhere else the deposit is whatever the tenancy agreement says, which is why six to ten months remains common in Bengaluru while one to three months is the norm in Delhi and Mumbai.
How long does a landlord have to return the security deposit?
Under the Model Tenancy Act the deposit must be refunded within one month of the tenant vacating, after deducting what is lawfully owed. Where the Act has not been adopted, the deadline is whatever the agreement states. If the agreement is silent, the one-month standard is the usual reference point, and an unexplained delay beyond that is what tenants typically escalate on.
What can a landlord deduct from a security deposit?
Amounts the tenant genuinely owes: unpaid rent up to the move-out date, unpaid electricity, water, gas or society maintenance bills, rent in lieu of a notice period the tenant did not serve, and the documented cost of repairing damage the tenant caused. Each line should be a real figure backed by a bill, quote or meter reading rather than a round-number estimate.
Can a landlord deduct for normal wear and tear?
No. Deterioration from ordinary living — faded paint, minor scuff marks, loosened hinges, worn tap washers, ageing of fittings — is the landlord's cost of owning the property. The deposit covers damage, meaning harm from misuse, negligence or accident, not the property simply getting older while someone lived in it normally.
Can a landlord deduct painting charges from the deposit?
Routine repainting between tenancies is maintenance and is not deductible on that basis alone. It becomes arguable in two situations: where the tenancy agreement expressly provides for painting at the tenant's cost, and where the walls need work beyond what their age and normal use would explain, such as heavy staining or holes. Even then, deduct the documented cost, not a standard flat charge.
Is a landlord required to pay interest on the security deposit?
Generally not, unless the tenancy agreement provides for it or a specific state rent law requires it. The Model Tenancy Act does not require interest on the deposit. Treat any interest obligation as a matter of your agreement and your state's legislation rather than assuming one exists.
What can a tenant do if the deposit is not returned?
Begin with a written demand giving a clear deadline, then a formal legal notice through a lawyer. If that fails, the forum depends on the state: a Rent Authority where the Model Tenancy Act has been adopted, otherwise a civil suit for recovery of money, and in some circumstances a consumer forum. Written records decide these matters, so keep the agreement, rent receipts, the handover communication and photographs.
Can a landlord keep the whole deposit if the tenant leaves early?
Not automatically. Leaving early usually triggers whatever the agreement says about notice, which normally means rent in lieu of the notice period that was not served. That is a specific, calculable amount. Forfeiting an entire deposit as a penalty, beyond actual loss, is a much weaker position than deducting the notice shortfall and any genuine dues.
The deposit is the part rental software forgets
Most tools stop at collecting rent. Nestwise keeps a running deposit ledger for every tenant, and at move-out produces the itemised settlement automatically — unpaid rent and charges already filled in, the tenant notified on Telegram, and a window for them to raise a concern before the money moves. Free while in early access.
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