A security deposit refund letter is a written request to return a deposit paid under an agreement (distributorship, dealership, vendor registration, tender or commercial lease) after the relationship ends or the condition for refund is met. It should identify the agreement and the deposit paid, confirm termination and the settlement of any dues, demand refund by a fixed date and ask for a statement of any deductions claimed.
The letter format
[YOUR LETTERHEAD] [YOUR NAME / BUSINESS NAME] | [ADDRESS] | GSTIN: [GSTIN] Date: [DATE] BY EMAIL AND SPEED POST To, [COMPANY / LANDLORD NAME] [REGISTERED ADDRESS] Kind attention: [NAME, DESIGNATION] Subject: Refund of security deposit of Rs [DEPOSIT AMOUNT] under [AGREEMENT NAME] dated [DATE] Dear Sir/Madam, 1. Under the [distributorship / dealership / vendor / lease] agreement dated [DATE] (the "Agreement"), we paid you a refundable security deposit of Rs [DEPOSIT AMOUNT] on [DATE] by [MODE, UTR / CHEQUE NO.]. Your receipt no. [RECEIPT NO.] dated [DATE] is enclosed. 2. The Agreement [expired on [DATE] / was terminated by [you / us] by letter dated [DATE] with effect from [DATE]]. 3. Under clause [CLAUSE NO.] of the Agreement, the deposit is refundable within [DAYS] days of [termination / handover / settlement of accounts]. 4. [All stock has been returned / reconciled vide [DOCUMENT] dated [DATE]. / The premises were handed over on [DATE] in good condition, as recorded in [HANDOVER NOTE].] As per our records, no amount is payable by us to you. [Or: The only amount payable by us is Rs [AMOUNT] towards [ITEM], which may be adjusted.] 5. We request you to refund Rs [REFUND AMOUNT] by [DATE: 15 DAYS FROM TODAY] to A/c [ACCOUNT NAME], [ACCOUNT NO.], IFSC [IFSC], [BANK]. 6. If you claim any deduction, please send us a written statement with supporting documents by the same date. A deduction without documents will not be accepted. 7. If the deposit is not refunded by [DATE], we shall be constrained to take legal action for recovery with interest [at [RATE]% as per clause [NO.] / at such rate as the court may allow] and costs, without further notice. Yours faithfully, [SIGNATURE] [NAME], [DESIGNATION] For [YOUR BUSINESS NAME] Enclosures: agreement extract; deposit receipt / bank proof; termination letter; stock reconciliation / handover note
How to fill it
- Find the proof of payment: the deposit receipt, the bank debit, or the agreement recital that acknowledges the deposit.
- Quote the refund clause and the period it allows. If the agreement is silent, ask for refund within a reasonable time, such as 15 to 30 days.
- Close the account first: reconcile stock, outstanding invoices, debit and credit notes, and state the net position honestly in paragraph 4.
- For a tenancy, attach the handover note, keys receipt and meter readings.
- Address it to the registered office, not only the regional manager you dealt with.
Common mistakes
- Asking for the refund while stock, claims or invoices are still unreconciled, which gives the other side a reason to hold the whole deposit.
- Losing the original receipt. Without proof of payment, the claim depends on the other side's books.
- Accepting "the deposit will be adjusted against future business" when the relationship has ended.
- Leaving it for years. The limitation period is usually three years from when the refund became due.
What happens next
If a statement of deductions arrives, check each item against your records and dispute what you cannot verify, in writing. If the refund is simply not made, send a legal notice: the legal notice format for payment recovery works for a deposit claim with small changes. Many distributor and vendor agreements carry an arbitration clause; otherwise, a civil or summary suit is the usual route.
FundRaksha handles security deposit recovery for distributors, vendors and contractors, with a 30% success fee and nothing upfront. For a deposit retained under a works contract, see the retention money release letter.
Last reviewed: 2026-10-20. Information for Indian businesses; not legal advice.