Security deposits running into six to 10 months’ rent are still common in several Indian cities despite the Centre’s Model Tenancy Act, 2021 proposing a cap of just two months for residential properties.
Legal experts say many tenants continue to lose part of their deposits through arbitrary deductions, delayed refunds, or lack of proper documentation.
The issue becomes especially significant at a time when rentals are rising sharply in metros such as Bengaluru, Mumbai and Delhi, increasing the upfront cash burden on tenants.
Experts say while tenants do have legal remedies, awareness about their rights remains low.
What is the legal limit on security deposits?
However, the law is only a model framework and becomes enforceable only after individual states adopt it.
“According to the provisions of the Model Tenancy Act, the security deposit shall not exceed two months’ rent in case of residential premises and six months’ rent for non-residential premises,” said Sahil Sharma, senior associate, Legum Solis.
But many states are yet to implement the law fully. In such cases, deposits are largely determined by market practice and bargaining power between landlords and tenants.
“There is presently no uniform nationwide cap on security deposits in India because landlord-tenant relations are governed by state-specific laws,” said Soayib Qureshi, partner, PSL Advocates & Solicitors.
Legal experts point out that cities such as Bengaluru have historically seen landlords demanding deposits equivalent to six to 10 months’ rent, especially in independent houses and older rental arrangements.
“Courts have generally frowned upon excessive or arbitrary deposits as being opposed to equity and fair dealing,” said B. Shravanth Shanker, managing partner, B. Shanker Advocates LLP.
Even where there is no formal cap, experts say tenants can challenge excessively high deposits if terms appear unreasonable or unconscionable.
What can landlords legally deduct?
Experts say landlords cannot deduct money arbitrarily from the deposit. Deductions must be linked to actual liabilities and supported by evidence.
Legally permissible deductions generally include:
· Unpaid rent or arrears
· Pending electricity, water, gas or maintenance charges
· Repair costs for damage beyond normal wear and tear
· Replacement of damaged fixtures, furniture or appliances
· Charges specifically mentioned in the rent agreement
“A landlord is legally entitled to deduct only those amounts that are reasonable, contractually permissible, and supported by actual loss,” said Alay Razvi, managing partner, Accord Juris.
The distinction between actual damage and ordinary wear and tear is critical. Routine ageing, faded paint, small wall marks, or regular depreciation usually cannot be charged to tenants.
“Blanket or arbitrary deductions, such as automatic painting charges or forfeiture of an entire deposit without justification, may not withstand legal scrutiny,” Qureshi said.
Experts advise tenants to insist on proper move-in and move-out inspections with photographs and written records. Landlords are generally expected to support deductions through invoices, repair bills, inspection reports, or photographs.
“The burden lies on the landlord to prove damage through inspection, invoices, or contemporaneous records,” Shanker said.
What can tenants do if deposit is not returned?
Lawyers say tenants should first attempt formal written communication before approaching courts or authorities.
The first step is usually sending a legal notice demanding refund of the deposit and seeking details of deductions made.
“If the landlord refuses to return the security deposit or makes unfair deductions, the tenant may issue a formal legal notice demanding refund and seeking an itemised explanation,” said Priya Gada, Advocate D. M. Harish & Co. LLP.
Where states have adopted tenancy reforms similar to the Model Tenancy Act, tenants may approach rent authorities, rent courts, or rent tribunals for faster resolution.
In states without such mechanisms, tenants can file civil recovery suits under general contract and property laws.
Experts say tenants may also seek:
· Interest on delayed refunds
· Compensation for harassment
· Recovery of litigation costs
In exceptional cases involving alleged fraud or dishonest withholding, criminal remedies may also be explored, though experts caution that most deposit disputes are treated as civil matters.
What happens in states where the Model Tenancy Act is not implemented?
Even without the Model Tenancy Act, tenants are not left without protection.
Disputes continue to be governed by existing state rent control laws, tenancy agreements, and broader civil law principles.
Applicable laws may include:
· Delhi Rent Control Act
· Maharashtra Rent Control Act
· Karnataka Rent Act
· Indian Contract Act, 1872
· Transfer of Property Act, 1882
· Specific Relief Act, 1963
“The tenancy agreement remains the primary governing document and determines the rights and obligations of both parties,” Qureshi added.
Experts emphasise that written agreements, payment receipts, photographs of the property condition, and documented communication remain the strongest safeguards for tenants in disputes over deposits.
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