Security Deposit Laws in India (2025): Tenant Rights, Refund Rules & Legal Guide

Security deposits are a critical part of renting in India, acting as a financial safety net for landlords and a commitment from tenants. However, disputes over refunds, deductions, or excessive deposits are common. Understanding India’s security deposit laws can help both landlords and tenants avoid conflicts. This guide explains key regulations, tenant rights, and best practices in simple, easy-to-understand language.

1. Key Laws Under the Model Tenancy Act 2021

The Model Tenancy Act (MTA) 2021 sets national guidelines for security deposits, though states can adapt these rules. Key provisions include:

• Deposit Caps:

  • Residential Properties: Up to 2 months’ rent.

  • Commercial Properties: Up to 6 months’ rent.

• Refund Timeline: Landlords must refund deposits within 1 month of tenants vacating, after deducting valid charges.

• Rental Agreement: Mandatory to mention the deposit amount, refund conditions, and deductions in a registered agreement.

2. Security Deposit Limits Across Indian Cities

While the MTA sets caps, deposit amounts vary widely by city due to local demand and property values:

City- Typical Deposit

Mumbai- 6-10 months’ rent

Bangalore- 6-10 months’ rent

Delhi, Kolkata- 2–3 months’ rent

Hyderabad- 2–3 months’ rent.

Note: Some landlords demand higher deposits despite legal limits. Tenants can negotiate or report violations to local rent authorities.

3. When Can Landlords Deduct from the Deposit?

Landlords can deduct for:

• Property Damage: Beyond normal wear and tear (e.g., broken tiles, holes in walls).

• Unpaid Rent or Bills: Outstanding utility dues or rent arrears.

• Breach of Agreement: Violations like unauthorized subletting.

Invalid Deductions:

• Routine maintenance (e.g., repainting, fixing plumbing).

• Natural wear (e.g., faded paint, worn-out hinges).

Tip: Landlords must provide an itemized list of deductions with receipts.

4. Tenant Rights and Steps to Claim Refunds

If your landlord refuses to return the deposit:

1. Negotiate: Discuss deductions and provide evidence (e.g., move-in/move-out photos).

2. Send a Legal Notice: Drafted by a lawyer, demanding refund within 21 days.

3. File a Complaint: Approach the Rent Control Authority or civil court.

4. Use the N.I. Act: If the landlord issued a post-dated cheque that bounced, file under Section 138.

Note: Courts may take months or years, so document everything (agreement, receipts, photos).

5. State-Specific Variations

While the MTA is a national framework, states have their own rules:

• Maharashtra: Requires landlords to pay interest on deposits.

• Tamil Nadu, UP: Fully adopted MTA with minor tweaks.

• Delhi: Follows the Delhi Rent Control Act, capping deposits at 2 months’ rent.

Check Local Laws: Always verify state-specific Rent Control Acts before signing agreements.

6. Best Practices for Tenants & Landlords

• For Tenants:

  • Document Everything: Take photos during move-in and move-out.

  • Get a Receipt: Ensure the landlord provides a signed deposit receipt.

  • Avoid Cash Payments: Use bank transfers for transparency.

• For Landlords:

  • Follow Legal Caps: Avoid overcharging to prevent disputes.

  • Maintain Transparency: Share deduction details promptly.

Conclusion

Security deposit laws in India aim to balance landlord and tenant interests. By understanding the Model Tenancy Act 2021, documenting agreements, and resolving disputes through legal channels, both parties can ensure a fair rental experience. Always consult local laws or a legal expert for state-specific queries.

FAQs

Q1. Can landlords charge more than 2 months’ rent as a deposit?
No, under the MTA 2021, residential deposits are capped at 2 months’ rent. However, cities like Mumbai often exceed this due to market demand.

Q2. Is a rental agreement mandatory?
Yes, a registered agreement is legally required to specify deposit terms.

Q3. What if the landlord doesn’t refund the deposit in 1 month?
Send a legal notice. If unresolved, file a case in civil court.

Q4. Can tenants withhold rent for deposit disputes?
No. Rent and deposit are separate; withholding rent may lead to eviction.