Does Your Security Deposit Earn Interest? Usually Not — Here's Why
Unlike some countries, Indian rent law doesn't require landlords to pay interest on a security deposit by default. It only happens if you negotiate it in.
- Act
- Model Tenancy Act, 2021 (2021)
- Act number
- Not a numbered central Act — a model law approved by the Union Cabinet on 2 June 2021 for voluntary adoption by states and UTs
- Enacting authority
- Ministry of Housing and Urban Affairs (MoHUA), Government of India
This article is for general information only and does not constitute legal advice. Always verify current provisions against the official source before relying on them.
No default interest requirement
In most Indian tenancies, a security deposit does not earn interest unless the rental agreement specifically includes a clause for it. There's no blanket statutory requirement forcing landlords to pay interest on the amount held.
When it does get negotiated
In longer tenancies — typically above two years — some tenants successfully negotiate a token annual interest credit against rent, particularly where the deposit is a large multiple of monthly rent. This is a negotiated term, not a legal default.
The practical implication
Since a large deposit sitting with a landlord for years earns the tenant nothing by default, it's worth negotiating the deposit amount down where possible, rather than assuming a larger deposit is offset by interest you're unlikely to receive.