SECURITY DEPOSIT REFUND AND SETTLEMENT LETTER
Date: __________
Place: __________
Dear Sir or Madam,
1. Background and definitions
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
3. The Security Deposit
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
5. Amounts credited to the Tenant
6.1 The settlement is computed as follows:
6.2 If the amounts itemised in clauses 4 and 5, applied to the Security Deposit and after deducting any retention under clause 8, do not produce the Net Refund Amount, those figures prevail and the Landlord shall pay the amount they produce.
7. Payment
7.2 Payment shall be made in full, without set-off, counterclaim, retention or condition, other than the deductions itemised in this letter and any retention this letter expressly provides for.
9.2 The refund of the Security Deposit is the repayment of a capital sum and is not rent. No tax is deductible at source on it under section 194-I of the Income-tax Act, 1961. Where any part of the Security Deposit has been appropriated toward rent, that part is rent and tax is deductible on it in the ordinary way.
9.3 Each party shall issue to the other the certificates and statements the Income-tax Act, 1961 requires, within the time it prescribes.
10. Goods and services tax
10.2 The Security Deposit is not treated as payment for a supply unless and until the Landlord applies it as consideration, in accordance with the proviso to section 2(31) of the Central Goods and Services Tax Act, 2017. Where any part of the Security Deposit has been appropriated toward rent or another taxable charge, the Landlord shall raise a tax invoice for that amount together with the tax on it, and the Tenant may claim input tax credit as the law allows.
10.3 Amounts deducted for damage, dilapidations, reinstatement or compensation for determination within the lock-in period are treated by the parties as compensation for a loss, and not as consideration for a supply of agreeing to tolerate an act, consistently with CBIC Circular No. 178/10/2022-GST dated 3 August 2022. If the tax authorities take a different view, the party found liable shall bear the tax, and the other shall co-operate in issuing the documents required.
11. Disputing an item
11.2 The Landlord shall not withhold, delay or make conditional the payment of any part of the Net Refund Amount that is not the subject of a notice under this clause. The undisputed balance shall be paid by the Payment Date whether or not a dispute has been raised, and payment of it is not an admission by either party about a disputed item.
11.3 Within the same number of days from receipt of a notice, the Landlord shall provide the Tenant with the documents relied on for the disputed item, and the parties shall meet, in person or remotely, to try to resolve it.
11.4 If an item remains unresolved thirty days after the notice, either party may pursue it under the clause headed "Governing law and dispute resolution".
12. Full and final settlement and mutual release
12.2 Until both of those things have happened, the release does not take effect. The Tenant's countersignature of this letter is an acceptance of it and, once the Net Refund Amount has been received, a receipt for that amount; it is not a waiver of any item disputed within the Dispute Window.
12.3 This letter renounces no share, interest, part or claim in or against the Premises or any other property. What it discharges is monetary claims between the parties under the Lease. It is an agreement recording that mutual discharge, and is to be stamped as such.
13. No surrender, no new tenancy
13.1 The Lease came to an end on the date recorded above. This letter records the settlement of accounts between the parties. It does not grant, surrender, assign or cancel any lease or licence, and it does not create, declare, assign, limit or extinguish any right, title or interest in or over the Premises.
13.2 The Tenant is not in occupation of the Premises. No payment made or received under this letter is rent, and nothing in this letter is the Landlord's assent to the Tenant continuing in possession for the purposes of section 116 of the Transfer of Property Act, 1882.
13.3 Where the Lease was registered, the parties shall co-operate, at the cost of the party requesting it, in executing and registering any further instrument required to record the determination of the Lease in the records of the Sub-Registrar.
14. Notices
Notices under this letter shall be in writing and delivered by hand against acknowledgement, or sent by registered post with acknowledgement due or by a reputed courier, to the address stated for the recipient in this letter. Where an email address is stated for a party in this letter, notice may also be given by email to that address, and takes effect on the next working day.
15. Governing law and dispute resolution
15.1 This letter is governed by the laws of India and, so far as the law of a State or Union Territory applies, by that of __________.
16. General
16.1 This letter and its annexures record the whole of what the parties have agreed about the Security Deposit and the amounts itemised in it, and replace any earlier statement of account between them on those matters.
16.2 No change to this letter is effective unless it is in writing and signed by both parties.
For and on behalf of the Landlord
Signature: ______________________________
Name: __________
Date: ______________________________
Accepted and countersigned for and on behalf of the Tenant
Signature: ______________________________
Name: __________
Date: ______________________________
Witnesses (recommended where this letter carries a mutual release)
- 1. Signature: ____________________ Name: ____________________ Address: ____________________
- 2. Signature: ____________________ Name: ____________________ Address: ____________________
RECEIPT
Signature of the Tenant: ______________________________
[ Affix a revenue stamp of Re. 1 here and sign across it. A receipt for a sum exceeding Rs. 5,000 must bear a revenue stamp under Article 53 of Schedule I to the Indian Stamp Act, 1899, read with section 30. ]