Quick Answer: Under the Model Tenancy Act framework, security deposits in India for residential properties are now capped at 2 months' rent, and 6 months' rent for commercial properties, in states that have adopted the Act — including recent alignment by Karnataka and Maharashtra in 2026. Landlords must refund the deposit, minus lawful deductions, within 30 days of the tenant vacating the property. This marks a major shift from the earlier 6–10 month deposit norm common in cities like Bengaluru and Mumbai.
If you're a landlord in Bengaluru, Mumbai, or any city updating its tenancy rules this year, the days of collecting a 10-month security deposit are ending. This guide explains exactly what's changed in 2026, what landlords can still legally charge, how deductions work now, and what happens if a landlord doesn't comply.
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Why Security Deposit Rules Are Changing in 2026
For years, Indian landlords — especially in cities like Bengaluru, Mumbai, and Gurgaon — routinely charged 6 to 10 months' rent as a security deposit, locking up a huge chunk of a tenant's savings before they even moved in. This large deposit often masked a deeper issue: many landlords still lack a clear, organized system to track rent and dues, relying on the deposit as a safety net instead. The Model Tenancy Act (MTA), 2021 was drafted to standardize this practice nationwide, but since housing is a state subject in India, each state had to formally adopt it.
Through 2025 and into 2026, several states have moved to align their local rent control laws with the MTA framework — most notably Karnataka, through the Karnataka Rent (Amendment) Act, and Maharashtra, tightening enforcement under Section 55 of its Rent Control Act. This has brought the long-standing "10-month deposit culture" in cities like Bengaluru and Mumbai to a formal end, at least on paper.
What Is the New Security Deposit Cap in 2026?
Under the Model Tenancy Act framework, as adopted by states in 2026:
- Residential properties: Maximum security deposit is capped at 2 months' rent
- Commercial properties (offices, shops, warehouses): Maximum security deposit is capped at 6 months' rent
This applies in states that have formally adopted the MTA framework or amended their local rent laws to match it. States still governed by older Rent Control Acts, or that haven't adopted the MTA, may continue to see higher deposits as common market practice — even if not strictly "illegal" under their existing local law.
Important: The Model Tenancy Act is a central template, not automatically binding nationwide. It becomes enforceable only once a state government formally adopts it or amends its own laws to match. Landlords should verify their specific state's current position rather than assuming the 2-month cap applies uniformly across India.
City-Wise Snapshot: What's Changed
Bengaluru (Karnataka): The Karnataka Rent (Amendment) Act, aligned with the Model Tenancy Act, caps residential deposits at 2 months' rent and commercial deposits at 6 months' rent. Deposits beyond this cap may not be enforceable through Rent Tribunals. Karnataka has also pushed mandatory digital registration of rental agreements through its Kaveri 2.0 portal.
Mumbai (Maharashtra): Maharashtra's tenancy reforms similarly cap residential deposits at 2 months' rent, with commercial capped at 6 months. Deposits must be refunded within 30 days of the tenant vacating. Agreements must be digitally stamped and registered on the IGR Maharashtra portal within 60 days of signing.
Other states: Adoption of the Model Tenancy Act varies. Some states have fully implemented it, others are in the process of aligning local laws, and a few continue to operate under older, separate Rent Control Acts. Landlords outside Karnataka and Maharashtra should check their specific state's current tenancy law before assuming the same caps apply.
What Counts as a Valid Deduction From the Security Deposit?
Landlords cannot deduct the security deposit arbitrarily. Under the 2026 framework, valid deductions generally include:
- Unpaid rent for the notice period or any outstanding dues
- Outstanding utility bills (electricity, water, maintenance) left unpaid by the tenant
- Repair costs for tenant-caused damage — beyond normal wear and tear
- Cleaning charges, only if explicitly stated in the rent agreement
What generally cannot be deducted:
- Normal wear and tear — faded paint, minor scuffs, or general aging of fittings from regular use
- Undocumented or estimated costs — deductions typically need to be backed by actual invoices or receipts, not vague estimates
- Lump-sum deductions without a breakdown — each deduction should be itemized separately with cost and reason
This shift toward itemized, documented deductions is a significant change from the earlier common practice of landlords deducting a flat amount "for wear and tear" without explanation.
Refund Timeline: How Quickly Must a Landlord Return the Deposit?
Under the Model Tenancy Act framework, landlords are required to refund the security deposit — minus valid deductions — within 30 days of the tenant vacating the property. This timeline starts from the date possession is physically returned, not from when repairs are completed or invoices are collected.
Landlords who anticipate deductions should complete the move-out inspection and gather repair invoices promptly, since delays past the 30-day window can expose them to disputes, and in some cases, penalties for non-compliance.
Move-In and Move-Out Documentation: Why It Matters More Now
Since deductions must now be justified and itemized, documentation has become the landlord's strongest protection against disputes. Best practices for 2026:
- Conduct a joint move-in inspection with the tenant, documenting the condition of walls, fittings, appliances, and furniture
- Attach an inventory list to the rent agreement — covering fans, lights, furniture, and other fixtures — to avoid disputes over "missing" or "damaged" items later
- Photograph the property at move-in and move-out for a clear before-and-after record
- Conduct a joint move-out inspection, ideally with the tenant present, before finalizing any deductions
- Provide a written, itemized deduction statement alongside the refund, listing each cost and its justification
Good documentation habits carry over to other parts of the rental relationship too — for instance, following a proper rent receipt format each month builds the same kind of paper trail that protects landlords during deposit disputes.
Landlords who skip this documentation are far more likely to face disputes at the Rent Authority or Rent Tribunal level, since the burden of proof for deductions increasingly falls on the landlord.
What Happens If a Landlord Doesn't Comply?
If a landlord fails to refund the deposit within the applicable timeline, or makes deductions without proper justification, tenants now have clearer recourse:
- Rent Authority / Rent Tribunal — in states that have adopted the Model Tenancy Act, tenants can file a formal complaint with the designated Rent Authority
- Interest and penalties — landlords found non-compliant may be ordered to refund the deposit along with interest, and may face additional penalties
- Consumer Forum — in some cases, tenants also pursue deposit disputes through consumer protection channels, treating non-refund as a deficiency in service
For landlords, this makes proactive compliance far more important than in the past, when disputes were harder for tenants to escalate formally.
What This Means for Landlords Going Forward
The 2-month deposit cap significantly changes cash flow expectations for landlords who previously relied on large upfront deposits as a financial cushion. Practical implications:
- Lower upfront protection against unpaid rent or damage, since the deposit pool is smaller
- Greater importance of tenant screening and verification before onboarding, since the deposit can no longer absorb as much risk
- Increased need for organized rent tracking, since landlords now have less deposit buffer to fall back on if rent payments are delayed
- Digital registration becoming standard, adding a compliance step that didn't previously exist in many states
Landlords managing multiple properties or tenants will find it increasingly important to track rent payments, dues, and tenant records systematically — both to reduce reliance on large deposits and to stay organized for compliance purposes. Choosing the best rent management software for this purpose, like MyRentMitra, helps landlords track pending rent, tenant records, and payment history centrally, which becomes more valuable precisely because the security deposit cushion is smaller under the new rules. A smaller deposit also means landlords should pay closer attention to their overall rental income and tax planning, since cash flow management now matters more than ever.
Frequently Asked Questions
How much security deposit can a landlord legally charge in 2026?
Under the Model Tenancy Act framework, residential security deposits are capped at 2 months' rent and commercial deposits at 6 months' rent, in states that have adopted the framework, including Karnataka and Maharashtra as of 2026.
Is the 2-month security deposit cap applicable across all of India?
No. The Model Tenancy Act applies only in states that have formally adopted it or amended their local laws to match. States with their own separate Rent Control Acts may still permit different deposit practices, so landlords should verify their specific state's current rules.
How soon must a landlord refund the security deposit after a tenant vacates?
Under the Model Tenancy Act framework, landlords must refund the deposit, minus valid deductions, within 30 days of the tenant vacating the property.
Can a landlord deduct the full security deposit for repainting?
Generally, no. Deductions must reflect actual documented costs for damage beyond normal wear and tear, itemized with receipts. Routine repainting for general upkeep, rather than tenant-caused damage, is typically not a valid deduction.
What can a tenant do if a landlord refuses to refund the deposit?
Tenants can send a written request for a refund and itemized deduction breakdown, and if unresolved, escalate to the Rent Authority or Rent Tribunal in states that have adopted the Model Tenancy Act, or to relevant local authorities elsewhere.
Final Thoughts
The shift to a 2-month security deposit cap is one of the most significant rental law changes Indian landlords have seen in years — and it directly affects cash flow planning, tenant screening, and documentation practices. Landlords who adapt early, by tightening tenant verification and keeping organized rent and payment records, will navigate this transition far more smoothly than those relying on the old deposit-as-cushion approach.
With a smaller deposit buffer, staying on top of rent collection and pending dues becomes even more important. MyRentMitra helps landlords track rent payments, tenant history, and dues across properties from a single dashboard — reducing reliance on a large deposit to manage risk.
This article is intended as general information and does not constitute legal advice. Rental laws vary by state and continue to evolve — landlords should verify current rules with their state's housing authority or a legal professional.