Can a landlord keep the security deposit after the tenant vacates?

No. The deposit must be refunded after legitimate deductions for actual damage or unpaid bills, supported by evidence. There is no legal basis for keeping it 'for goodwill'.

What deductions can a landlord make from the deposit?

Only actual damage and unpaid dues, with bills or estimates as proof. Normal wear and tear — a cracked wall after a six-year tenancy — is not a valid deduction.

Is the security deposit subject to TDS?

No. TDS applies to rent payable, not to the refundable security deposit. The two are treated separately.

Security Deposit Rules in India

Q: What is the normal security deposit amount in India?

There is no central law fixing the amount. The widely followed norm is 2-3 months' rent for residential properties in most cities, rising to 6-10 months in high-demand markets like Bangalore and Noida.

How much deposit is "normal"?

There is no central law fixing a security deposit amount. The widely followed norm is 2-3 months' rent for residential properties in most cities, and up to 6-10 months in high-demand markets like Bangalore and Noida. One growing exception: states that adopt the Model Tenancy Act cap residential deposits at two months' rent. The deposit is yours to hold, but it is not yours to spend — it is a security against damages or unpaid dues (see what to do when a tenant stops paying rent for how arrears and the deposit interact). None of it protects you if you have rented to the wrong person, so start with tenant verification and police checks before you take a rupee.

Security Deposit & Move-out Refund Calculator

Calculate net refund amount & check Model Tenancy Act compliance

Move-Out Legal Check

Monthly Rent (₹)

Security Deposit Paid (₹)

City / Market Norm

Move-out Deductions

Unpaid Rent (₹)

Unpaid Dues/Bills (₹)

Damage Repairs (₹)

Check if damage is normal wear & tear (e.g. wall repainting after 3+ years)

Net Refund Due To Tenant

₹1,74,500

Deposit Norm Multiple:6.0 Months

Total Valid Deductions:-₹5,500

Deposit represents 6.0x monthly rent. Model Tenancy Act recommends max 2 months for residential properties.

Automate Move-Out Settlement Receipts

The 10 things every landlord should know

These points cover the practical realities of deposits in India:

Deposit must be refunded on vacating, after legitimate deductions — there is no law saying you can keep it "for goodwill".

Deductions should be for actual damage or unpaid bills, with bills/estimates as proof. Normal wear and tear is not a valid deduction.

A written move-out checklist (with photos) protects you if a dispute goes to consumer court.

If a tenant vacates without notice, you can adjust reasonable notice-period rent from the deposit.

You cannot legally charge "deposit renewal" every year — the deposit is for the tenancy, not an annual fee.

For commercial leases, TDS applies on rent; deposit refunds are separate and not subject to TDS.

Agreement stamp duty does not change based on deposit size, but the deposit amount should be recorded in the agreement.

Keep the deposit in your own account but track it as a liability. Mixing it with personal funds is how disputes start.

On handover, issue a signed deposit refund receipt. It closes the loop legally and keeps the relationship clean.

Use a move-out settlement statement that lists each deduction against each unpaid bill or damage item.

The move-out deduction rule that most landlords get wrong

Courts consistently hold that a deposit deduction must be "reasonable and proportional". A landlord who deducts for a cracked wall after a 6-year tenancy (normal wear) will likely lose in consumer court. For clear guidelines on what counts as structural vs routine fixes, see landlord vs tenant maintenance responsibilities in India. Photograph the unit at check-in and check-out — it is the single strongest piece of evidence you can have.

How TenantsFlo handles deposits and settlements

TenantsFlo records the deposit when the tenant moves in, and the move-out wizard walks you through deductions (unpaid rent, damages, utility arrears) to calculate a fair settlement. Both you and the tenant get a clean statement of what was deducted and why.