Security deposit is one of the most common sources of dispute between landlords and tenants in Mumbai. Landlords worry about recovering money if the tenant damages the property or defaults on rent. Tenants worry about not getting their deposit back. This guide covers everything — how much can be charged, what the law says, what can be deducted, and what your agreement must say.
What is a Security Deposit?
A security deposit is a refundable amount paid by the tenant to the landlord at the start of the tenancy, in addition to the first month's rent. It is held by the landlord throughout the agreement period as a safeguard against unpaid rent, property damage, or outstanding utility bills. At the end of the tenancy, the deposit is returned to the tenant after any valid deductions.
In the Leave and License agreement, the deposit is referred to as "interest free refundable deposit" — meaning the landlord holds the amount without paying interest on it, and returns the full amount at the end of the agreement term (minus any valid deductions).
How Much Security Deposit Can a Landlord Charge in Mumbai?
There is no single fixed amount mandated by law for Leave and License agreements in Maharashtra. The deposit is mutually agreed between landlord and tenant and written into the registered agreement. In practice:
Is Security Deposit Always Refundable?
The standard security deposit in a Leave and License agreement is refundable. The agreement explicitly states it as "interest free refundable deposit." However, there is also an option for a non-refundable deposit (sometimes called premium or advance) which can be charged in addition to the refundable deposit if both parties agree.
| Type | Refundable? | Stamp Duty Treatment | Common Use |
|---|---|---|---|
| Refundable Security Deposit | ✅ Yes — returned at end of tenancy | 10% notional interest added to taxable value | Standard in all residential agreements |
| Non-Refundable Deposit / Premium | ❌ No — kept by landlord | Full amount added to taxable value | Some commercial or premium residential |
Security Deposit and Stamp Duty — Important Link
Most people don't know this — your security deposit amount directly affects your stamp duty. For stamp duty calculation, the Maharashtra government adds 10% notional interest on the refundable deposit per year to the taxable agreement value.
💡 Example — How Deposit Affects Stamp Duty
Agreement: ₹20,000/month rent, ₹1,00,000 deposit, 11 months
Taxable amount: (₹20,000 × 12) + (10% × ₹1,00,000 × 1 year) = ₹2,40,000 + ₹10,000 = ₹2,50,000
Stamp duty: 0.25% × ₹2,50,000 = ₹625
If deposit was ₹2,00,000 instead: stamp duty would be ₹725. Higher deposit = higher stamp duty. Use our stamp duty calculator to see the exact impact.
What Can Be Deducted from Security Deposit?
- → Unpaid rent for any month
- → Outstanding electricity bills
- → Outstanding water/maintenance bills (if tenant's responsibility)
- → Cost of repairing tenant-caused damage (broken fixtures, damaged walls, broken doors)
- → Cleaning charges — only if specifically stated in agreement
- → Any other amount owed as per the agreement terms
- → Normal wear and tear (minor paint fading, small scuffs)
- → Routine painting or whitewashing — landlord's responsibility
- → Structural repairs — landlord's responsibility
- → Age-related deterioration of fixtures
- → Deductions not mentioned in the agreement
- → Arbitrary amounts without proof or receipts
When Must the Deposit Be Returned?
Under Section 24 of the Maharashtra Rent Control Act, the landlord must refund the security deposit within one month of the tenant vacating the property, after deducting any valid amounts. Unreasonable delay or arbitrary withholding of the deposit can lead to legal action by the tenant.
In practice — both parties should do a joint property inspection on the last day of tenancy, agree on any deductions, and settle the deposit refund at the time of key handover. This prevents disputes later.
⚠️ Common Deposit Disputes — How to Avoid Them
- Landlord claims damage that existed before tenant moved in — Fix: take move-in photos/video
- Landlord delays refund beyond 30 days without reason — Fix: send written WhatsApp notice
- Deposit amount not in agreement — Fix: always record exact amount in registered agreement
- Deposit paid in cash with no proof — Fix: always pay deposit via bank transfer
- Deductions claimed without receipts — Fix: demand itemized list with invoice before accepting deduction
What the Agreement Must Say About Deposit
The registered Leave and License agreement must clearly state:
Tips for Tenants — Protecting Your Deposit
- Always pay deposit via bank transfer — never cash. The transaction reference goes into the agreement as proof.
- Photograph every room before moving in — date-stamped photos on your phone are evidence of pre-existing condition.
- Get the registered agreement — the deposit amount in a registered agreement is the legal reference point if any dispute arises in court.
- Do a joint inspection on last day — walk through the property with the landlord and agree on any deductions before handing over keys.
- Follow up in writing — if deposit is not refunded within 30 days, send a WhatsApp message requesting refund. Written records matter.
Tips for Landlords — Protecting Yourself
- Set the right deposit amount — 2–3 months is standard for Mumbai suburbs. Too high and good tenants walk away.
- Document property condition at move-in — take photos with the tenant present. Both parties sign off on the condition.
- Register the agreement — an unregistered agreement makes it much harder to enforce deposit terms in court.
- Keep all repair receipts — if you need to make deductions, you need invoices to back them up.
- Refund promptly — refunding within 30 days with a clear deduction statement prevents disputes and protects your reputation.
Get Your Agreement Registered — Protect Your Deposit
The deposit amount in a registered agreement is the only legally enforceable reference. propdeed registers your Leave and License agreement with all deposit details recorded accurately.
Register Now →Service fee ₹1199 · Govt. charges extra · Delivery as per SRO timeline