Karnataka Rent Law 2026: Is There a 2-Month Deposit Cap in Bangalore?

KEY TAKEAWAYS

The Karnataka Rent (Amendment) Act, 2025 took effect on 8 January 2026. It replaces jail terms with money penalties; it does not cap deposits.
The two-month deposit cap comes from the Centre's Model Tenancy Act, 2021, which Karnataka has not adopted as of 28 September 2026.
There is no legal requirement to refund deposit above two months' rent on existing Bangalore leases.
Every tenancy should be in writing and properly stamped; leases longer than one year must be registered.
NRI landlords should use a specific power of attorney, keep a clean deposit trail and add a clause for future rule changes.

Over the past year, a message has been doing the rounds in Bangalore apartment groups and on property sites: Karnataka has passed a new rent law, security deposits are now capped at two months' rent, and landlords must refund anything above that. Some articles even give it a name, the "Karnataka Rent Amendment Act 2026".

I have checked this against the bill text, the gazette notification and newspaper reports. The short answer, as of 28 September 2026: Karnataka did amend its rent law, and the amendment is in force, but it does not cap security deposits at two months. The two-month figure comes from the Centre's Model Tenancy Act, which Karnataka has not adopted.

Below: what actually changed, what is only proposed, and what Bangalore landlords, tenants and NRI owners should do now.

What Has Actually Been Passed

The law that changed is the Karnataka Rent (Amendment) Act, 2025. It started life as LA Bill No. 67 of 2025, dated 8 December 2025, and the Legislative Assembly passed it during the Belagavi session in mid-December 2025. It was published in the Karnataka Gazette Extraordinary on 8 January 2026 and took effect from then. The law firm Khaitan & Co, in an April 2026 note, records it as Karnataka Act No. 07 of 2026.

Its purpose, per the bill's Statement of Objects and Reasons, is to decriminalise minor offences and rationalise penalties in the Karnataka Rent Act, 1999, in line with the Centre's Jan Vishwas Act of 2023. In plain terms:

No more jail terms for breaches under the Rent Act. What used to be "offences" are now "contraventions" attracting money penalties.
Much higher penalties. For example, unauthorised subletting goes from a fine of up to ₹5,000 to a penalty of up to ₹50,000, and a landlord taking an illegal premium from up to ₹3,000 to up to ₹30,000.
The Rent Controller adjudicates these penalties directly, instead of cases going to a criminal court.
Penalties rise automatically by 10% every three years from commencement.

Khaitan's note is explicit that the amendment leaves the substantive rules alone: grounds of eviction, fixing or revising rent, duration of tenancy and security deposit limits are unchanged. The bill text I read on the PRS Legislative Research site does not mention security deposits at all.

Where the Two-Month Deposit Cap Comes From

The two-month figure is real, but it belongs to a different document. The Model Tenancy Act, 2021 was approved by the Union Cabinet on 2 June 2021 as a template for states. Among other things it caps security deposits at two months' rent for residential premises and six months for non-residential premises, requires tenancy agreements to be reported to a new Rent Authority within two months, and sets up Rent Courts and Rent Tribunals.

Because land and tenancy are state subjects, the Model Act does nothing in a state until that state passes its own law. Deccan Herald reported back in July 2021 that Karnataka might bar owners from taking more than two months' rent as advance, but that never became law. In late 2025, several outlets ran "Home Rent Rules 2025" stories built on the Model Act, often without saying each state must adopt it. That is largely where the confusion started.

On 26 December 2025, Deccan Herald answered the question directly and said the Karnataka government has not passed any such law. Nothing I have found in official or mainstream sources up to 28 September 2026 changes that. Some blogs now state that the January 2026 amendment introduced a two-month cap, mandatory Kaveri registration within 60 days and a 90-day notice for rent increases. I could not find those provisions in the bill text or in any law firm or newspaper account of the Act, so I would not rely on them.

Passed vs Proposed: A Quick Reference

Topic	What the law says now (Sept 2026)	What the Model Tenancy Act proposes
Security deposit (residential)	No two-month cap; set by agreement in practice	Maximum two months' rent
Security deposit (commercial)	Set by agreement	Maximum six months' rent
Written agreement	Required under Section 4 of the Karnataka Rent Act	Required, and reported to the Rent Authority within two months
Penalties for breaches	Money penalties only, adjudicated by the Rent Controller (since 8 January 2026)	Penalties set by the state law
Dispute forum	Rent Controller and courts, for premises covered by the Act	Rent Authority, Rent Court and Rent Tribunal
Registration of the lease	Compulsory under the Registration Act for leases longer than one year	Registration with the Rent Authority for all tenancies
Refund of deposits above two months on existing leases	No legal requirement	Model Act is designed to apply to new tenancies

Does the Karnataka Rent Act Even Apply to Your Flat?

This is a question most articles skip. The 1999 Act has wide exemptions in Section 2(3). Among them, it does not apply to premises whose standard or deemed rent exceeds ₹3,500 a month in the larger urban areas listed in Part A of its First Schedule, or to buildings for 15 years after construction or substantial renovation. It also excludes most non-residential premises.

Many newer Bangalore apartments may therefore sit outside the Act, with tenancies governed mainly by the agreement, the Transfer of Property Act and the Registration Act. Whether a particular property is covered depends on facts like its age and rent history, so this is one to check with a lawyer before you rely on either the Act's protections or its penalties.

What Bangalore Landlords Should Do Now

There is no new deposit rule to comply with, but the January amendment raised the cost of getting the basics wrong, and the direction of travel is towards formal, documented tenancies. What I tell owners:

Put every tenancy in writing. A verbal arrangement or an old unsigned draft is a risk for you, not just the tenant.
Stamp the agreement properly before or at signing, through Karnataka's e-stamping system. An unstamped or under-stamped agreement is hard to rely on in a dispute.
Register if the lease runs longer than a year. Under Section 17 of the Registration Act, a lease for a term exceeding one year must be registered. This is why the 11-month agreement became the Bangalore habit.
Keep the deposit reasonable and documented. Record the amount, how it was paid, and the refund terms and permitted deductions in the agreement. Pay and receive it by bank transfer, not cash.
Take subletting seriously. Where the Act applies, unauthorised subletting now carries a penalty of up to ₹50,000.
Complete police verification of the tenant through Bengaluru City Police or the Karnataka State Police online services, and keep the acknowledgement.

For existing leases, nothing in force requires you to refund deposit above two months' rent. If a tenant asks, you can point to the actual law, politely. Refunding early or reducing the deposit at renewal is a commercial choice, not a legal one.

What Bangalore Tenants Should Do Now

Do not withhold rent or demand a partial refund on the strength of a viral message; the law as it stands will not back you. Instead:

Negotiate the deposit at the start or at renewal, especially if you have a clean rental record.
Read the refund clause. It should say when the deposit is returned after you hand back the keys, and what deductions are allowed (unpaid rent, utility dues, damage beyond normal wear).
Do a move-in inventory with dated photos and get the owner to sign it. This is the single best protection against arguments over deductions.

Stamp Duty and Registration on Rent Agreements in Karnataka

Rental agreements attract stamp duty under the lease article of the Karnataka Stamp Act, calculated on the average annual rent plus the deposit or advance and any premium. Published guides commonly put it at about 0.5% for agreements up to a year and 1% for leases of one to ten years, with some citing a small fixed cap for short residential agreements. The guides I read do not agree on the exact caps, so treat these figures as indicative and check the current figure on the Kaveri portal or with your sub-registrar before you pay.

Registration, when needed, is done at the sub-registrar's office through the Kaveri system. By convention the tenant often pays the stamp duty and registration cost, but this is negotiable and should be written into the agreement.

How NRI Landlords Should Adjust

NRI owners have the most to lose from loose paperwork. A few adjustments:

Use a specific power of attorney for a local representative to sign, stamp and register agreements on your behalf, and to deal with the Rent Controller or police if needed.
Route rent and deposits to your NRO account and keep a clean record of the deposit, because you will have to refund it in rupees from India.
Remind your tenant about tax at source. A tenant paying rent to a non-resident landlord must deduct tax and deposit it with the government. Your chartered accountant can advise on rates and on applying for a lower deduction certificate.
Write the agreement assuming the rules may change. If Karnataka later adopts a Model Act style law, renewals could fall under a deposit cap. A clause allowing the deposit to be adjusted at renewal to comply with any future law avoids a dispute later.

This is the work our property management service handles for owners abroad: tenant screening, agreements, stamping and registration, police verification, inventories and deposit refunds. Our NRI guide to buying in Bangalore covers the tax side in more detail.

How to Prepare If Karnataka Adopts the Model Act

There is no bill to adopt the Model Tenancy Act before the Karnataka legislature that I could find as of 28 September 2026. If one does come, the Model Act's own design is that it applies to new tenancies, with existing ones continuing on their terms, though a state law can differ. Sensible preparation costs very little:

Move to clear written agreements now, with the deposit, rent revision method and notice periods spelled out.
Keep digital records: signed agreement, stamp certificate, payment trail, inventory and police verification.
If deposits ever fall to two months, careful tenant screening matters more than a large cash buffer.
Watch for the bill, the gazette notification and the commencement date. Until all three exist, it is not the law.

For context on rents, see our Bangalore rental market outlook. This post is general information, not legal advice; for a specific tenancy, speak to a lawyer.

Frequently Asked Questions

Is there a two-month security deposit cap in Bangalore in 2026?

No. As of 28 September 2026 Karnataka has not adopted the Model Tenancy Act, which is where the two-month cap comes from. The January 2026 amendment to the Karnataka Rent Act deals with penalties, not deposits.

What did the Karnataka Rent (Amendment) Act, 2025 change?

It replaced imprisonment with money penalties of up to ₹50,000, imposed by the Rent Controller and rising 10% every three years. It was gazetted on 8 January 2026.

Must my landlord refund deposit above two months' rent?

Not under current law. You can negotiate a lower deposit at renewal, but there is no legal basis to demand a refund of the excess on an existing agreement.

Do I need to register an 11-month rent agreement in Karnataka?

Registration is compulsory under the Registration Act for leases longer than one year, which is why 11-month agreements are common. The agreement still needs to be in writing and properly stamped.

What should an NRI landlord in Bangalore change?

Use a specific power of attorney for a local representative, receive rent through your NRO account, ensure the tenant deducts tax at source, and confirm tax details with a chartered accountant.

If you own a flat in Bangalore and want the agreement, stamping, registration, police verification and deposit handled properly, especially from abroad, our property management service does exactly this. Message me on WhatsApp.

Sources

Last updated Sep 28, 2026. Figures and rules change; check current details with a professional before you act.

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ABOUT THE AUTHOR

Tariq Sallam

Founder, Proptals · Karnataka RERA registered agent

Tariq has advised buyers, sellers, landlords, landowners and developers in Bangalore since 2004. He writes about what he sees on site visits, in negotiations and at registration offices.

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