A client pays a ₹30,000 advance, you start the brand identity work, and two weeks in they message asking for the deposit back because they have "changed direction." You have already put in real hours. They are asking you to return money for work you actually did. Most freelancers freeze here, unsure whether they are legally required to refund anything at all.
Here is what actually determines whether a client is entitled to their deposit back, the clause that prevents this conversation from happening in the first place, and how to handle it if you are already mid-dispute with no clause to point to.
There is no automatic right to a refund once work has started
A client is not automatically entitled to their advance back just because they want to stop the project. Once you have accepted the advance and started work, you have a contract in progress, and Indian contract law generally looks at who actually breached the agreement, not who asked for money back first. If you delivered nothing and did no work, returning the advance is usually the fair and expected outcome. If you have already put in real hours against the agreed scope, the advance (or a portion of it) is compensation for that work, not a fully refundable deposit sitting untouched. For the simpler case where a client cancels before any advance is even paid, see the guide on what to do when a client cancels before any advance or work, which is a much cleaner scenario than this one.
This is exactly why the payment clause in your contract matters more than instinct or goodwill in the moment. Without a clause specifying what happens to the advance if the client cancels, both sides are left arguing from first principles, which almost always favours whoever has more leverage in the relationship, not whoever is actually right.
The clause that prevents this dispute entirely
State explicitly in the contract, before any work begins, that the advance is non-refundable once work has started, and that the client owes the remaining balance for work completed to date if they cancel mid-project. Something like: "The advance payment is non-refundable once work has commenced. If the client terminates the engagement, the freelancer is entitled to invoice for all work completed up to the termination date." One clause, stated upfront, and this entire conversation becomes a formality instead of a fight.
This is not adversarial, it is standard. Clients who work with agencies or experienced freelancers regularly see this exact clause and rarely push back on it, since it is a reasonable protection for time already spent. See the guide on writing a freelance contract that actually protects you for where this clause fits alongside the rest of your standard agreement, and the guide on creating a professional freelance invoice in India for how to invoice the remainder once a refund amount is settled.
What to do if you are already in this conversation with no clause
If your contract is silent on refunds and a client is asking for their advance back mid-project, do not offer a full refund reflexively just to avoid conflict. Calculate what you have actually delivered against the agreed scope and propose a partial refund that reflects real work completed, framed as fair rather than as a concession. "I have completed the initial concepts and one round of revisions, which represents roughly 40% of the scope. I can refund 60% of the advance and hand over what has been completed so far."
Document everything you delivered with timestamps, whether that is design files, drafts, or communication showing progress, since this is what actually justifies your position if the client disputes the amount you are proposing to keep. A client who genuinely sees the work you produced is far more likely to accept a reasonable partial refund than one who only has your word for it.
When you might actually owe a full refund
If you are the one who cannot deliver, whether from missed deadlines you cannot recover from, quality that does not meet what was agreed, or you simply cannot continue the engagement, a full or near-full refund is usually the fair outcome regardless of what the contract says, since you did not hold up your side. Trying to keep an advance for work you failed to deliver is the fastest way to turn a difficult client into a public complaint or a formal dispute you did not need to create.
Be honest with yourself about which side of this you are actually on before you decide how hard to push back on a refund request. See the guide on freelance client red flags to spot before you sign if this pattern is recurring across multiple clients, since that usually points to a screening problem upstream, not just bad luck.
Keeping this from becoming a pattern
A single deposit dispute is normal business friction. Several in a row usually means your scope definitions are too loose, your kickoff conversations are not setting clear expectations, or you are taking on clients who were never fully committed to the project in the first place. Tightening the scope-of-work section of your contract, per the guide on handling scope creep without losing the client or margin, closes most of the ambiguity that turns a normal cancellation into an argument about money.
Rinto lets you set payment terms directly on the contract and the invoice, so the non-refundable-advance clause and the amount owed for work completed are both visible in writing from day one, not something you are reconstructing from memory once a client actually asks for their money back.
Frequently Asked Questions
Does a client have a legal right to a refund if they cancel a project?
Not automatically. Once you have accepted an advance and started work, whether a refund is owed generally depends on who breached the agreement and how much work was actually completed, not simply on the client asking for it back. If you delivered nothing, a full refund is the fair default. If you delivered real work against the agreed scope, the advance is compensation for that work, not a fully refundable deposit.
Should I make my advance payment non-refundable?
Yes, once work has started. State clearly in your contract that the advance is non-refundable once you begin work, and that you are entitled to invoice for work completed if the client cancels mid-project. This single clause prevents most refund disputes from happening at all, since both sides know the terms before any money changes hands.
What if my contract does not mention refunds and a client wants their advance back?
Calculate what you have actually delivered against the agreed scope and propose a partial refund that reflects real work completed, rather than offering a full refund reflexively. Document what you delivered with dates and files as evidence, and frame the proposed amount as fair rather than as a concession you are making just to end the conversation.
When do I actually owe a full refund to a client?
When you are the one who did not hold up your side of the agreement, whether through missed deadlines, work that does not meet what was agreed, or being unable to continue the engagement. In that case a full or near-full refund is usually the fair outcome regardless of your contract's wording, since the client did not get what they paid for.
How much of an advance should I ask for to reduce refund disputes later?
40 to 50% upfront is standard for new clients, which is enough to filter out uncommitted clients without exposing you to disputing a large refund later. For larger projects, splitting the balance into milestone payments tied to specific deliverables further limits how much money is at stake in any single refund conversation, since only the current milestone's payment is ever in question.