Does a landlord have to pay interest on a security deposit in Indiana?
Indiana requires no interest on a residential security deposit, and imposes no rule about where the deposit is kept.
Cited to Ind. Code § 32-31-3-12 (Return of deposits; deductions; liability), in the official 2026 edition of Title 32 IC 32-31-3-12(a), (b) and 2 more cited sources · Verified August 28, 2026
IC 32-31-3 is the state's entire deposit chapter, and the word "interest" does not appear in it in any sense at all — not as an earnings rule, not as an ownership interest, not once. The chapter's only money obligation is principal: IC 32-31-3-12(a) requires the landlord to return "the security deposit" minus amounts applied to accrued rent, damages from the tenant's noncompliance, and unpaid utility or sewer charges, all itemized in a written notice delivered within forty-five days of termination and delivery of possession, on pain of owing the whole deposit plus the tenant's reasonable attorney's fees. IC 32-31-3-13 then lists the only purposes a deposit may be used for, and none of them contemplates investing the money or earning on it. There is no escrow, trust, separate-account, commingling or named-institution provision anywhere in the chapter.
Indiana deposit interest at a glance
| Interest owed to the tenant | No — no statute addresses it |
|---|---|
| How the rate is set | No rate exists — there is no interest duty |
| Current figure | No published figure exists |
| Rate rules | No rate rules — no duty exists |
| Accrual and payment | No payment duty exists |
| Who and what is covered | No statutory conditions stated — see the summary and notes |
| Statute controls where or how the deposit is held | No statute addresses how the deposit is held |
| Interest-bearing account required | No statute addresses whether the account must bear interest |
| Custody rules | No statute addresses custody of the deposit |
| Penalty for violation | No statutory penalty reaches an interest violation specifically |
| Local rules | None noted for this state |
Cite this page: "Landlord Atlas, Indiana Security Deposit Interest Laws (verified August 28, 2026), landlordatlas.com/laws/deposit-interest/indiana/" — free to cite and quote with a link (how these records are verified). Everything above is cited in the citations section below.
Check the verified Indiana answer — and every state and city that differs — in the deposit interest calculator — free, no signup, built on the same verified Indiana law as this page.
Notes and caveats
- "To be held" in the definition is not a custody duty — IC 32-31-3-9(a) defines a security deposit as money paid to the landlord or the landlord's agent "to be held for all or a part of the term of the rental agreement to secure performance" of the tenant's obligations. That describes what the payment is for. It names no account, no institution and no place, and no other section of the chapter supplies one.
- The permitted uses are a closed list, and earning is not among them — IC 32-31-3-13 allows a deposit to be used only to reimburse actual damages beyond ordinary wear and tear, to pay rent in arrears or rent due on premature termination, to pay the last rental period where a written agreement so stipulates, and to reimburse utility or sewer charges. A closed list of permitted uses with no investment clause is the opposite of an interest scheme.
- Nothing can be waived into existence either — IC 32-31-3-17 makes any waiver of the chapter void, by landlord or tenant alike. That cuts in the tenant's favour on the rules Indiana does have, and it is a reminder that the chapter is the whole of the law here: a lease can of course promise interest, but the statute neither requires it nor sets a rate for it.
- Charts giving Indiana an interest rule are importing another state's law — No provision anywhere in IC Title 32 pairs a security deposit with interest — every occurrence of the phrase 'security deposit' in the whole property title was examined against that possibility and none does. A fifty-state table showing Indiana with an interest or separate-account requirement has substituted a neighbouring state's rule.
Common questions: Indiana deposit interest
Each answer is the verified value from the table above, restated as a direct answer. Free to quote with a link to this page.
- What is the Indiana security deposit interest rate right now?
- No published figure exists.
- When must a landlord pay or credit deposit interest in Indiana?
- No payment duty exists.
- Does the deposit have to be in an interest-bearing account in Indiana?
- No statute addresses whether the account must bear interest.
- What happens if a landlord does not pay deposit interest in Indiana?
- No statutory penalty reaches an interest violation specifically.
- Do any cities or counties in Indiana have their own deposit-interest rules?
- None noted for this state.
Citations
- Ind. Code § 32-31-3-12 (Return of deposits; deductions; liability), in the official 2026 edition of Title 32 · IC 32-31-3-12(a), (b) (verified 2026) Official source
- Ind. Code § 32-31-3-13 (Use of deposits), in the official 2026 edition of Title 32 · IC 32-31-3-13 (verified 2026) Official source
- Ind. Code § 32-31-3-9 ('Security deposit' defined), in the official 2026 edition of Title 32 · IC 32-31-3-9(a) (verified 2026) Official source
How this record was verified: Complete read of IC 32-31-3, Indiana's security-deposit chapter, every section from 32-31-3-1.1 through 32-31-3-19 — including 32-31-3-13.5 — in the official static text of the 2026 edition of the Indiana Code published by the General Assembly; every occurrence of 'interest', 'escrow', 'trust', 'segregate', 'commingle', 'bank', 'financial institution', 'separate account' and 'accrue' in the chapter examined in context, the chapter returning no occurrence of 'interest' in any sense; and a title-wide check in which every occurrence of the phrase 'security deposit' anywhere in IC Title 32 was examined for an interest term within four hundred characters on either side, returning none.