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Security deposit vs advance

Ganeshbabu K (Audit and Tax Advisory) (48564 Points)

24 July 2012

what is the difference between Security deposit and advance

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CA Mayank Tulsyan (B.Com(H), ACA) (274 Points)
Replied 24 July 2012

There is a big difference between a security deposit and an advance payment .

In case of rental agreement the security deposit is held by the landlord to be assured of payment in case of any damage in the property in use and possession. An advance payment sometimes is collected at the inception of the rental agreement to assure the landlord that s/he will be paid the last month of rent before the tenant vacates the property. A security deposit usually may not be used toward the payment of the last month's rent. When a tenant has paid the equivalent of a month's rent as a security deposit, the tenant must pay the last month's rent to the landlord and then wait for the landlord to return the security deposit when the tenant vacates the saod property.