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Short answer: there is no single national limit on how much security deposit a PG can take. The Model Tenancy Act, 2021 caps residential deposits at two months’ rent, but it is a model law that applies only where a state or UT has enacted it. Elsewhere, what you and the resident sign in the agreement decides the amount. That leaves the agreement doing most of the work. Whatever the law in your state, the deposit can only cover what the resident actually owes when they leave: unpaid rent, unpaid bills and damage beyond normal wear and tear. The balance goes back to them, with a written breakup.
This guide covers typical amounts, where the legal caps apply, fair and unfair deductions, refund timelines, disputes, and the paperwork that keeps you out of them. It ends with a deposit clause you can paste into your agreement and a sample deposit settlement statement for checkout.
How much deposit do PGs take?
No official survey tracks PG deposits, so treat the following as common market practice, not law:
| Type of stay | Deposit commonly seen | Notes |
|---|---|---|
| Shared PG bed (monthly) | About one month’s rent; sometimes two | Many student PGs ask for one month plus the first month’s rent at joining. |
| Private room in a PG or co-living | One to two months’ rent | Higher when furniture, AC or appliances are provided. |
| Short or daily stays | Often a small fixed amount, or none | Rent is usually collected in advance instead. |
| Whole flat let to a family | Varies widely by city | Some cities, notably Bengaluru and Chennai, have long had much higher deposits for flats. |
A PG deposit is meant to cover one unpaid month plus a margin for damage. Asking for far more mainly makes your beds harder to fill. If your state has a cap (next section), stay within it.
The legal limits: Model Tenancy Act and state laws
Land and tenancy are state subjects. The Union Cabinet approved the Model Tenancy Act, 2021 (MTA) in June 2021 and circulated it to states as a template. Under the MTA, the security deposit cannot exceed two months’ rent for residential premises and six months’ rent for non-residential, and it must be refunded when the landlord takes back vacant possession, after deducting any liability of the tenant.
Adoption is partial. In replies to Parliament in 2022 and 2023, the Ministry of Housing and Urban Affairs listed only four states with revised tenancy laws: Assam, Andhra Pradesh, Tamil Nadu and Uttar Pradesh. Since then the Centre has also extended Assam’s law to Chandigarh (from 6 May 2026). The deposit rules differ between them:
| State / UT | Law | Deposit rule (residential) |
|---|---|---|
| Assam | Assam Tenancy Act, 2021 (based on the MTA) | Up to two months’ rent |
| Chandigarh | Assam Tenancy Act, 2021 as extended to Chandigarh (S.O. 2265(E), 6 May 2026) | Up to two months’ rent; agreements reported online to the Rent Authority |
| Uttar Pradesh | UP Regulation of Urban Premises Tenancy Act, 2021, s.11 | Up to two months’ rent; refunded on taking over vacant possession, after due deductions |
| Tamil Nadu | TN Regulation of Rights and Responsibilities of Landlords and Tenants Act, 2017, s.11 | Not more than three months’ rent unless the agreement says otherwise; refund when the landlord takes back possession (amended 2018) |
| Andhra Pradesh | Revised tenancy law, as reported by MoHUA | Check the current Act text with a local lawyer |
| All other states | Older rent control laws or none | No general cap; the agreement decides |
Two cautions. First, many viral “new rent rules” posts claim a nationwide two-month cap; there is none. Second, a PG arrangement is often drafted as a licence to use a bed rather than a lease of premises, and whether a given state tenancy law covers it can depend on the facts. When in doubt, keep within two months anyway: it is the benchmark a Rent Authority or court is likely to look at, and residents increasingly know it.
Fair and unfair deductions
Every state law and the MTA speak only of deducting the tenant’s liability. In practice, that means money the resident actually owes you. A useful test: could you show the resident a bill, a meter reading or a photo for this deduction?
| Usually fair (if documented) | Usually unfair (unless clearly agreed in writing) |
|---|---|
| Unpaid rent up to the last day of stay or the notice period | Routine repainting or deep cleaning every time someone leaves |
| Unpaid electricity, water or other utility dues per the agreement | “Lock-in” or early-exit penalties that are not in the signed agreement |
| Damage beyond normal wear and tear: broken furniture, a cracked mirror, a lost key or access card | Normal wear and tear: faded paint, minor scuffs, ageing mattresses, worn curtains |
| Pay-in-lieu for notice not served, if the agreement sets the notice period | Flat “processing” or “admin” fees invented at checkout |
| Agreed charges for missing inventory items | Holding the deposit until a replacement resident is found |
Under the MTA, structural repairs and whitewashing are listed as the landlord’s job. If you want to recover painting or cleaning costs, the amount or method must be in the agreement before the resident moves in, and it should be reasonable. Repair charges should match the actual cost, with a bill or quote if the resident asks.
How quickly should you refund?
- Where a state law applies (UP, Tamil Nadu, Assam, Chandigarh), the deposit is due when you take back vacant possession, after deductions.
- Elsewhere, the agreement sets the timeline. A common and defensible practice is to settle on the checkout day or within 7 to 15 days, which leaves time for the final electricity reading or bill.
- Refund by bank transfer or UPI, not cash, so both sides have a record.
- If a bill is still pending, refund the undisputed part now and hold back only a small, stated amount for that bill.
Long, unexplained delays are what turn most deposit issues into complaints, reviews and legal notices.
A copy-ready deposit clause
Put the deposit terms in writing before the resident moves in. Our free PG agreement generator and rent agreement format include a deposit section. You can adapt this wording (fill in the blanks and check it against your state’s law):
Security deposit. The Resident has paid a refundable security deposit of ₹______ (Rupees ______ only) on __/__/____ by ______ (UPI/bank transfer, ref. no. ______). The deposit carries no interest.
Use of deposit. The deposit shall not be adjusted against monthly rent during the stay. At checkout, the Owner may deduct only: (a) unpaid rent up to the end of the stay or the notice period in clause __; (b) unpaid electricity and other charges payable under this agreement, based on the final meter reading; and (c) the reasonable cost of repairing or replacing damage beyond normal wear and tear, as recorded against the move-in inventory and photographs.
Not deductible. Normal wear and tear, routine painting and routine cleaning [or: a fixed cleaning charge of ₹____], and any charge not listed in this agreement.
Notice. Either party shall give ____ days’ written notice. If the Resident leaves without notice, rent for the unserved part of the notice period may be deducted.
Refund. The Owner shall give the Resident a written statement of deductions and refund the balance by UPI/bank transfer within ____ days of the Resident vacating and returning keys/access cards.
If you plan to charge for notice not served, your notice-letter process matters too. See our notice to vacate letter format, and set out house rules on damage and guests in a written PG rules and regulations document.
Receipts and records
- Give a receipt for the deposit itself, separate from rent, with the amount, date and payment reference. Our rent receipt generator works for this.
- Stamp the agreement properly. Some states count the deposit when working out stamp duty. See our stamp duty and registration guide.
- Keep the deposit’s history: any top-up, partial use or adjustment, with dates.
My PG Manager records each resident’s deposit and its history, and sends rent receipts on WhatsApp, so you are not searching old chats at checkout.
Example: deposit settlement statement at checkout
Give the resident a statement like this on the day they leave, even if nothing is deducted:
| Item | Amount (₹) | Basis |
|---|---|---|
| Security deposit received (12 Jan 2026) | 12,000 | Receipt no. 0142 |
| Less: rent for 1–14 October (notice period) | − 4,200 | ₹9,000/month, 14 days; clause 6 |
| Less: electricity, September–October | − 640 | Meter 4,512 → 4,592 = 80 units × ₹8 |
| Less: broken study-table chair | − 900 | Move-in photo vs checkout photo; repair bill attached |
| Wall marks, worn mattress | 0 | Normal wear and tear: not charged |
| Balance refunded | 6,260 | UPI on 15 Oct 2026, ref. ____ |
Both sides sign or acknowledge it (a WhatsApp “received, thanks” works). In My PG Manager, the checkout step lets you adjust outstanding dues from the deposit, or write them off, before marking the resident as left, so the numbers on this statement match your books.
Deposit disputes: where residents complain
If a deposit is not refunded, the usual route is:
- Written demand. The resident asks for the refund and the breakup in writing. Many disputes end here.
- Legal notice through a lawyer.
- Rent Authority. In states and UTs that have one under the new tenancy laws (for example Tamil Nadu, Uttar Pradesh, Assam, Chandigarh), disputes go to the Rent Authority and Rent Court instead of the civil court.
- Consumer commission. Residents of commercially run PGs and co-living operators sometimes file before the District Consumer Commission, online through e-Daakhil, often after contacting the National Consumer Helpline (1915). Whether a deposit dispute is a consumer “service” matter depends on the facts, and commissions have not all taken the same view.
- Civil court for a money recovery suit, where no Rent Authority exists.
For owners, the cheapest defence is a clear file: the signed agreement, the deposit receipt, move-in photos, meter readings, bills and the settlement statement. Our legal compliance guide for PG owners covers the other registrations and records you should keep.
Good practice that prevents disputes
- Move-in inspection with photos. Photograph the room, furniture and fittings on day one. Share them with the resident so both sides have the same record.
- Inventory list signed at move-in: bed, mattress, cupboard, chair, keys, access card, remote.
- Meter readings at move-in and checkout, photographed.
- Joint checkout inspection, with the resident present, before keys are returned.
- Written deduction list, every time, with the basis for each line.
- Refund quickly, and only hold back what you can justify.
- Same rules for everyone. Charging one resident for painting and not another invites complaints.
Software helps with the record-keeping. My PG Manager keeps the deposit, dues and receipts for each resident in one place; it has a 14-day free trial, then costs ₹159 a month.
Frequently asked questions
What is the maximum security deposit a PG can take in India?
There is no national limit. Under the Model Tenancy Act, the cap is two months’ rent for residential premises, but that applies only where a state or UT has adopted it, such as Assam, Uttar Pradesh and Chandigarh. Tamil Nadu’s law allows up to three months unless the agreement says otherwise. Elsewhere, the agreement decides.
Has my state adopted the Model Tenancy Act?
Probably not. As of the latest government replies, only Assam, Andhra Pradesh, Tamil Nadu and Uttar Pradesh had revised their tenancy laws, and Assam’s law was extended to Chandigarh in 2026. Check your state’s housing or revenue department for current status.
Can a PG owner deduct painting charges from the deposit?
Only if the agreement clearly says so and the amount is reasonable. Routine repainting is normal wear and tear, and the Model Tenancy Act treats whitewashing as the landlord’s responsibility.
How long can a PG take to refund the deposit?
Under the new state tenancy laws, the refund is due when the owner takes back possession. Elsewhere it depends on the agreement; settling on the day or within 7–15 days is common practice.
Can the deposit be used as the last month’s rent?
Only if both sides agree in writing. Many owners prefer not to, because it leaves nothing to cover damage or unpaid bills.
Where can a tenant complain if the deposit is not returned?
Start with a written demand and a legal notice. Then the Rent Authority, where one exists. For commercially run PGs, the District Consumer Commission (via e-Daakhil) may also be an option. Otherwise, a civil court.
Sources
- Model Tenancy Act, 2021: deposit cap, refund, Rent Authority, repairs: PRS Legislative Research.
- States with revised tenancy laws (Rajya Sabha reply, 25 July 2022): Rajya Sabha USQ 856; Assam as first adopter: Hardeep Singh Puri (MoHUA minister).
- Assam Tenancy Act extended to Chandigarh, S.O. 2265(E), 6 May 2026: TeamLease RegTech; Chandigarh Tenancy Rules: ThePrint.
- UP Regulation of Urban Premises Tenancy Act, 2021, s.11: Vidhi Judicial.
- Tamil Nadu Act 42 of 2017, s.11 (as amended by Act 39 of 2018): CaseMine; India Code.
- Consumer complaints: e-Daakhil; National Consumer Helpline.
Last reviewed: October 2026. General information, not legal advice. Tenancy rules vary by state and by agreement; confirm with a local lawyer or your state’s Rent Authority.
We build My PG Manager, the app PG and hostel owners use for rooms, tenants, rent collection and WhatsApp reminders. Our guides come from running it with owners across India.
