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Security Deposit Refund and Settlement Letter

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Also called

  • Security Deposit Refund Letter
  • Deposit Settlement and Discharge Letter
  • Full and Final Settlement Letter (commercial lease)
  • No Dues and Deposit Refund Letter
  • Deposit Release Letter
  • Final Settlement of Accounts on Vacating Premises
  • Suraksha Jama Rashi Vapsi Patra
  • Jamanat Wapsi Patra

When you need it

The letter closing the money at a commercial tenancy's end, issued after the tenant hands back the premises: records deposit held, itemised deductions, rent/CAM/utilities reconciliation, TDS/GST position, net figure, payment date. Tenant countersigns; payment brings mutual release.

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Leans tenant-side — deductions must be itemised/vouched, undisputed balance paid even while an item's disputed. Not for: a still-running lease to end early (needs a surrender deed); a tenant still in possession; a non-refundable-premium deposit; a pending suit/arbitration; or a residential letting under a rent-control statute.

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You can fill this one in on this site, and read the whole draft on screen before you decide anything about it. It is a carefully drafted template; it is not advice about your own facts.

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See stamp duty, registration and witnesses

What follows is the position for this kind of document. The amount is set by the state the property is in and it changes, so the figure for your own state is worth confirming at the sub-registrar’s office before you pay anything.

Stamp duty

No ad valorem property duty — creates/extinguishes no interest. Two heads bite: the receipt endorsement needs a Re. 1 revenue stamp over Rs. 5,000 (Article 53, s.30); and the mutual discharge — if characterised as a release, it can be charged on the value renounced at a far higher rate (lakhs on a large deposit), under-stamping making it inadmissible until the deficit and penalty are paid. Safe course: stamp as an agreement recording mutual discharge of MONETARY claims only (the residuary agreement article; confirm the Punjab or Chandigarh figure with the Sub-Registrar), keeping clause 12.3's no-property-interest statement.

Registration

Not compulsorily registrable — extinguishes no property interest (s.17(1)(b) doesn't engage), not a lease (s.17(1)(d)); clause 13 says so. Trap: if the closed-out lease was itself registered and unexpired, ending it needs a separate surrender deed, itself compulsorily registrable under s.17(1)(b) where it extinguishes an interest worth Rs. 100 or more.

Notarisation

Not required by law, worth doing where the release is the valuable part — a notary's identity/date record is hard to dislodge if attacked as forged. A party abroad: Indian consular officer, or notarisation plus apostille, then stamped within three months of receipt (s.18).

Witnesses

No statutory requirement (not a will, s.63) but two recommended for a mutual release. Authority matters more: a company signs through a s.21 authorised person with board resolution attached; an LLP/firm/HUF through its designated partner/authorised partner/Karta. The tenant's countersignature is the operative acceptance.

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Sample preview — placeholder answers, not your data

SECURITY DEPOSIT REFUND AND SETTLEMENT LETTER

Date: 1 April 2026
Place: Bengaluru

From (the Landlord)
X, an individual, of X
PAN: X
GSTIN: X
Email: X

To (the Tenant)
X, an individual, of X
PAN: X
GSTIN: X
Email: X

Subject: Refund of the security deposit and settlement of accounts on the determination of the Lease Deed dated 2 April 2026

Dear Sir or Madam,

1. Background and definitions

1.1 By the Lease Deed dated 2 April 2026 (registered with the Sub-Registrar, Ludhiana, at Serial No. 4521 of 2021) ("the Lease"), the Tenant occupied, on the terms there recorded, the premises described as: X ("the Premises").

1.2 The term ran from 3 April 2026. The Lease came to an end on 4 April 2026 by reason of the expiry of the agreed term.

1.3 In this letter "the Landlord" includes a licensor, "the Tenant" includes a licensee, and "rent" includes licence fee, service charge and any other periodic payment reserved by the Lease. Words in the singular include the plural.

2. Handover of the Premises

2.1 The Tenant delivered up vacant possession of the Premises to the Landlord on 5 April 2026 ("the Handover Date"). The parties carried out a joint inspection of the Premises on 6 April 2026, and the record of that inspection is the agreed record of the condition of the Premises on handover.

2.2 All keys, access cards, parking tags and other access devices issued to the Tenant have been returned to the Landlord.

3. The Security Deposit

3.1 Under the Lease the Tenant paid the Landlord a refundable security deposit of ₹25,000 (Rupees Twenty Five Thousand only) ("the Security Deposit"). It was paid as follows: INR 30,00,000 by RTGS on 2 April 2021 (UTR SBIN321092...) and INR 10,00,000 by cheque no. 004512 dated 15 April 2021.

3.2 The Security Deposit was held by the Landlord as security for the performance of the Tenant's obligations under the Lease. It was not rent, premium or consideration for any supply, and the Landlord did not become entitled to it by reason only of the determination of the Lease.

4. Itemised statement of deductions

4.1 The Landlord has deducted from the Security Deposit only the amounts set out in this clause and any retention expressly provided for in clause 8. No deduction is made otherwise than as set out here or there, and no deduction is claimed as a round or unvouched sum.

— Arrears of rent: ₹25,000 (Rupees Twenty Five Thousand only). Basis and period: X.

— Common area maintenance, society and building charges: ₹25,000 (Rupees Twenty Five Thousand only). Basis and period: X.

— Utilities, including electricity, water, diesel generator supply and fuel: ₹25,000 (Rupees Twenty Five Thousand only). Basis, meter numbers and readings: X.

— Damage and dilapidations: ₹25,000 (Rupees Twenty Five Thousand only). Basis, with the items of damage and the quotation or invoice relied on: X. This deduction is limited to the cost of making good actual damage. It does not include fair wear and tear, for which the Tenant is not liable.

What this document is for

A landlord and a commercial tenant use this once the tenant has actually handed back the premises at the end of a lease or licence, to close out the money between them — how much of the security deposit is being returned, what has been deducted from it and why, and by when the balance will be paid. The tenant’s countersignature is what turns it into an accepted settlement rather than a one-sided statement.

It itemises each deduction — unpaid rent, CAM, utilities, damage, reinstatement, or a lock-in exit charge — against the deposit held, adds any credit the tenant is owed, and states the net figure, how it will be paid, and by when. Where an item is genuinely disputed, the settlement still requires the undisputed balance to be paid without waiting for that one item to be resolved.

Before you use this — it settles the money, not the tenancy itself

This letter is not a substitute for formally ending a registered lease. If the lease being closed out was itself registered and its term had not yet expired, ending it needs a separate registered deed of surrender or cancellation — this settlement letter deals only with the deposit, the reconciliation and the mutual release, not with clearing the lease off the register.

Whether this document is treated, for stamp purposes, as a simple agreement recording a mutual discharge of money claims, or as something closer to a release — which can be charged at conveyance-like rates on the value given up rather than a small fixed fee — depends on how it is worded and on the state’s own stamp schedule. Keep it to money claims only, with an express statement that no interest in the property is being released, and confirm the position for your state before it is signed.

Stamp paper and registration

Stamp paper needed

Depends

Typical stamp duty — Punjab

Ask us — This template is drafted to avoid ad valorem property duty by staying strictly to a discharge of money claims, but the actual head it falls under — and the small revenue-stamp requirement on the receipt itself above Rs 5,000 — has not been localised to Punjab’s own stamp schedule. Confirm both the receipt-stamp requirement and the agreement head with the Sub-Registrar before relying on a figure.

Typical stamp duty — Chandigarh

Ask us — Same reason as Punjab — this template has not been localised to Chandigarh’s own schedule, so confirm the current position locally. This is separate from, and much smaller than, the stamp duty already paid on the original lease or licence when it was signed — see the FAQ on deposit stamp duty below for that figure.

Registration at the Sub-Registrar

Depends — Not compulsorily registrable on its own — it extinguishes no interest in the property and is not a lease. But if the lease being closed out was itself registered and its term had not yet run out, clearing the register needs a separate registered deed of surrender or cancellation; this letter does not do that on its own, in either state.

Notary or witnesses

Not required by law, though worth doing where the mutual release is the part that actually matters, since a notary’s record of who signed and when is harder to dispute later. Two witnesses are recommended though not compulsory; what matters more is that whoever signs for a company, LLP, firm or HUF is properly authorised, since that is what gets checked if the release is later challenged.

What you will need before you start

  • The lease or licence that has ended — its date, its registration particulars if registered, and how and when it actually came to an end
  • The date vacant possession was actually handed back, and, ideally, a joint inspection record with photographs — the best defence against a disputed damage claim
  • The full deposit amount originally held, and how it was paid
  • Every deduction intended to be made, each with its own figure and its own supporting basis — an invoice, a meter reading, a quotation — since an unvouched deduction is the easiest one for a tenant to dispute
  • The tenant’s current bank details or preferred payment mode for the refund

Common mistakes

  • Sending a lump-sum deduction figure with no breakdown or supporting invoice for each item — an unvouched deduction is the part of a settlement letter most likely to be disputed and the hardest to defend later.
  • Treating this letter as if it also ends a registered lease that has not yet expired — closing that out needs a separate registered surrender or cancellation deed, not this settlement letter.
  • Naming a group company, or a director personally, as the party that paid the deposit instead of the entity that actually paid it — a mismatch here is a common and costly way to leave the true tenant with no standing to claim the refund.

Questions people ask before using this document

Does the landlord have to itemise every deduction from the security deposit?

Yes, on this template — each deduction is recorded against its own figure and its own supporting basis, such as an invoice, a meter reading or a quotation, rather than as a single lump sum. An unvouched deduction is the part of a settlement letter most likely to be disputed later, so keep the supporting document for every figure claimed.

Can the landlord withhold the whole deposit while one item is still disputed?

No, not under this template — the undisputed part of the balance is still payable on time even while a specific item, such as a damage or reinstatement charge, remains genuinely disputed between the parties. The release itself can also be limited to the deposit and the amounts actually itemised here, expressly reserving any disputed claim rather than forcing it to be resolved before anything is paid.

Is stamp duty on the security deposit paid again when it is refunded?

No — stamp duty on a deposit is a one-time charge, paid when the original lease or licence was stamped, not when the deposit is later returned. In Chandigarh, that original charge includes a further 3% on the refundable security deposit itself, on top of the rent-based duty, and it applies to the deposit only — never to advance rent. This settlement letter itself attracts only the much smaller receipt or agreement stamping described above, not that figure again.

Does this letter alone end a registered lease that has not yet expired?

No. This letter settles the money between the parties, not the legal tenancy itself. Where the lease being closed out was registered and its term had not yet run out, a separate registered deed of surrender or cancellation is needed to actually clear it off the register — sign that alongside or before this settlement letter, not instead of it.

What happens if the landlord and tenant disagree about a damage or reinstatement deduction?

This template gives the tenant a stated number of days to dispute any specific item, and lets the release be limited to the deposit and the amounts actually agreed, expressly reserving the disputed item rather than holding up the whole settlement. That keeps the undisputed balance moving while the one contested figure is worked out separately, on its own evidence.

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