Why take a deposit at all
A member who leaves owing a month's rent, or with a broken chair and a cabin that needs repainting, is a cost you cannot easily recover. The deposit is your cover. It also acts as a mild commitment: a member who has paid two months up front is less likely to vanish after three weeks.
At the same time, a deposit that is too high keeps good members from signing, and a refund that drags on for months is the single most common complaint about coworking spaces on review sites. The aim is a fair amount, clear rules and a quick, documented refund.
How many months
Common practice across Indian coworking spaces is:
| Product | Typical deposit |
|---|---|
| Private cabin, monthly agreement | Two months' licence fee |
| Private cabin, 11-month agreement with lock-in | Two to three months |
| Dedicated desk | One month |
| Hot desk or day pass | Usually none; paid in advance instead |
| Virtual office | None, or a small fixed amount |
Two months is the sensible default for cabins. One month barely covers a single missed payment; three months is common in metros for larger cabins but will be negotiated down by most small businesses. State your deposit on the price list so there is no surprise at signing.
Put it in the agreement
The deposit clause in your leave and licence agreement should say, in plain words:
- The amount, and that it is interest-free (which is the norm).
- When it is paid: typically with the first month's fee, before the member moves in.
- That it may not be adjusted against the last month's rent without your written consent. Members often ask to "use the deposit for the final month"; decide your policy and write it down.
- What may be deducted (the list in the next section).
- The refund timeline, such as within 15 or 30 days of handover.
- How it will be refunded: bank transfer to the account it came from, which keeps the paper trail clean.
If you change the licence fee at renewal, decide whether the deposit tops up to match. Most operators leave it unchanged for small increases and top up for large ones.
What you can deduct
Only what the agreement allows, and only what you can show. The usual list:
- Unpaid licence fee and charges up to the exit date, including meeting room hours and printing beyond the free allowance.
- Notice period shortfall. If the agreement asks for 30 days' notice and the member gives 10, the remaining 20 days may be charged, if your clause says so.
- Damage beyond normal wear and tear. A scuffed wall is wear; a hole drilled for a TV mount is damage. Charge actual repair cost, with the vendor's bill.
- Missing items. Keys, access cards, chairs and anything else on the inventory signed at move-in.
- Cleaning only if the cabin is left in a condition that needs more than routine housekeeping.
You cannot deduct for things that were never written down, for repainting a cabin after a normal term, or for your own vacancy after the member leaves. Keeping the whole deposit "because they left early" without a clause that says so will not survive a dispute.
Receipt and record at the start
Issue a receipt the day the deposit arrives, separate from the rent invoice. It should say "Security deposit, refundable, interest-free" and reference the cabin and agreement. Then keep a simple record per member:
- Amount, date received and mode (UPI, transfer, cheque).
- The move-in inventory: items in the cabin, their condition, and a few dated photos.
- Any later top-up or part refund.
Coworking OS keeps the deposit on the member's ledger as its own line, so the balance is visible next to rent and never mixed into income. Whatever system you use, keep the deposit out of the revenue figure in your books; it is a liability you owe back.
GST on deposits
A refundable security deposit is not payment for a service, so no GST is charged when you collect it, and the receipt should carry no tax. The position changes only if some of the deposit is kept: an amount adjusted against unpaid rent or forfeited for damage becomes consideration at that point and is typically taxed at the same rate as the rent, with a tax invoice for it. Confirm the exact treatment with your CA, especially for forfeiture.
The refund: aim for days, not months
The refund is the member's last experience of your space, and it is the one they talk about. A routine that keeps it quick:
- On the day of handover, walk the cabin with the member against the move-in inventory, note anything to deduct, and have both sides sign or confirm on WhatsApp.
- Within two working days, send a settlement statement: deposit held, less each deduction with its reason and bill, equals refund due.
- Transfer within the timeline in the agreement, to the account the deposit came from, and send proof of transfer.
- If a final invoice (for the last part-month or extras) is still open, net it off in the same statement rather than waiting for the member to pay it separately.
Fifteen days is comfortable for a small space. Thirty days is the most that feels reasonable to members. If you genuinely need to wait for a vendor's repair quote, say so in writing and give a date.
A settlement message you can copy
Hi Meera, thanks for your time at the space. Here is the settlement for Cabin 204: deposit held ₹20,000, less ₹1,200 for the replacement access card and ₹3,500 for the October 1 to 7 licence fee, so ₹15,300 is due back to you. I will transfer it to the account the deposit came from by 12 October and send you the confirmation.
Common disputes, and how to avoid them
- "I never saw an inventory." Share the move-in photos and list on WhatsApp on day one so it sits in their chat too.
- "The deposit was supposed to cover the last month." Decide the rule, write it in the clause, and remind them when they give notice.
- "You kept it for wear and tear." Charge only actual repair bills, and share them.
- "It has been three months." Put the refund date in the settlement message and keep it.
Handled this way, the deposit rarely becomes a conversation at all, which is exactly what you want.