The PG security deposit: how much, what you may keep, and how to settle it

Ask a PG owner about their worst resident and you will usually get a story that ends at the deposit. Ask a former PG resident about their worst PG and you will get the same story from the other side.

That symmetry is the tell. Both people remember the ending as unfair, which almost never means one of them was dishonest. It means the deposit was never defined, and two reasonable people filled the silence with two different assumptions.

This is orientation, not advice. Tenancy law in India is state law, PG arrangements sit awkwardly inside it, and the answer for your house depends on where you are and what you agreed. Nothing here is a substitute for a lawyer looking at your actual arrangement.

The thing that makes PG deposits different

Most writing about deposits is about tenancy — a landlord, a tenant, a lease. A PG is usually not that.

A tenant has exclusive possession of a defined premises. A PG resident normally has a bed in a room somebody else also sleeps in, in a house where the owner sets the rules, changes the linen and can move them to another bed. In law that pattern is closer to a licence than a tenancy: permission to occupy, rather than an interest in property.

The distinction is not academic, and it cuts both ways:

• Tenancy protections a resident might expect — deposit ceilings, notice rules, restrictions on re-entry — may not attach to a licence at all.
• The protections an owner might expect from tenancy law do not necessarily attach either.

What fills the gap is whatever the two of you actually agreed. Which is why the deposit clause in a written agreement is worth more in a PG than in a flat, and why the agreement is the document most owners skip.

How much to take

There is no single national answer. The Model Tenancy Act proposes a ceiling of two months' rent for residential premises — but it is a model act, states have to adopt it into their own law, and adoption has been uneven. Whether it reaches a PG licence arrangement in your state is exactly the question to put to a lawyer rather than to a blog.

The commercial reasoning, separately from the legal position, is simpler than it looks. A deposit exists to cover three things:

1. Rent that is owed when somebody leaves.
2. Damage beyond ordinary wear.
3. Bills in their name that have not been settled.

A deposit far larger than a realistic worst case is not additional safety. It is a barrier to filling the bed — and an empty bed costs you close to a full month's rent, which is the arithmetic in what a PG actually earns. Set it against the risk it actually covers.

What you may fairly keep

The word doing the work here is fairly, because this is where the arguments live.

Defensible deductions:

• Unpaid rent, including a notice period served but not paid for.
• Damage beyond fair wear and tear — a broken window, a burnt worktop, a missing mattress.
• Unpaid utility bills the resident was responsible for.
• Anything specific you wrote down in advance and they agreed to.

Not defensible, however common:

• Ordinary wear. Paint that has aged, a mattress that has been slept on for a year, a tap washer. Those are the cost of running a house, not damage.
• Routine cleaning between residents. Turning a bed around is your operating cost. Charging for exceptional mess is different — but say so in advance, or it reads as a fee invented at the exit.
• A round number. "We keep one month" as a policy, unconnected to anything that happened, is the single fastest way to a review that costs you the next three residents.

The test worth applying to any deduction: could you show the resident a photograph, a bill or a line in a ledger that explains it? If not, you are about to have an argument you will lose in public even if you win it at the door.

Settle it quickly, and show the working

Most deposit disputes are not really about the amount. They are about a resident who has moved out, has no leverage left, cannot get a straight answer, and concludes they are being stalled.

Three things prevent almost all of it:

Agree the deductions before they leave, not after. Walk the room together on the last day. Disagreement is far cheaper while both people are standing in the room looking at the same thing.

Give a written breakdown. Not a number — a list. Rent outstanding, this specific damage, this bill. A resident who can see the arithmetic usually accepts it; a resident handed a smaller number than they expected with no explanation never does.

Pay the balance on a date you said out loud. "Within a week of move-out" that you actually keep is worth more goodwill than a slightly larger refund that arrives whenever you get to it.

The part that hurts your books

A deposit is not income. It is money you are holding that belongs to somebody else, and it comes back.

This matters more than it sounds. A month with several move-outs can be genuinely cash-flow negative while looking like a normal month on a rent report — because the rent came in and the refunds went out, and only one of those was ever really yours. If you have never separated deposits held from money earned, you are almost certainly overstating what the business makes.

The related failure is quieter: dues that stack up unnoticed until move-out, and are then discovered to be larger than the deposit. At that point your only remedy is asking somebody who has already left for money. That is a collection problem masquerading as a deposit problem — see getting the rent in.

How HamaraPG handles it

Deposits are held against the booking they belong to rather than mixed into rent, so what you owe back is a number you can read rather than reconstruct. At settlement the outstanding bills on that booking are already there to deduct against, the deductions are itemised, and the refund is worked out from the deposit minus what was actually owed — with the bills it paid off marked as settled from the deposit, so the same rupee is never counted twice.

That is on the free tier, because a house that cannot see what it is holding is not really running a PG yet — and because the alternative is a notebook, which is where most deposit arguments are born.

Related reading: the rental agreement PG owners skip, which is where the deposit terms should live, and what a PG actually earns.