Leave Policy in India

India's leave framework draws from multiple overlapping statutes. The Factories Act 1948, the Maternity Benefit Act 1961, state-level Shops and Establishments Acts, and the Employees' State Insurance Act 1948 all apply simultaneously. Where entitlements conflict, the most favourable provision governs.

• Annual leave: Minimum 15 days of paid earned leave per year after completing 240 days of employment, under the Factories Act 1948.
• Public holidays: 12 public holidays per year, including 3 compulsory national holidays (Republic Day, Independence Day, Gandhi Jayanti).
• Maternity leave: 26 weeks of paid leave for female employees with fewer than two surviving children, under the Maternity Benefit Act 1961.
• Sick and casual leave: 12 to 24 days per year, governed by state-specific Shops and Establishments Acts, with amounts varying by state.
• Paternity leave: No statutory entitlement exists in the private sector. Coverage depends entirely on the employment contract or company policy.

Gloroots helps employers manage India's multi-statute leave obligations through its Global Employer of Record (EOR) platform, with local execution and centralized governance.

Leave Policy at a Glance

The table below summarises the main leave categories applicable to employees in India. State-level rules and employer policy may provide more favourable entitlements than the statutory minimums shown.

Overview and Legal Basis for Leave in India

India's leave framework draws from several central and state statutes. The primary central laws are the Factories Act 1948 (Section 79), the Maternity Benefit Act 1961 (amended 2017), the Employees' State Insurance Act 1948, and the Industrial Establishments (National and Festival Holidays) Act. State-level Shops and Establishments Acts and the Industrial Employment (Standing Orders) Act 1946 add further obligations that vary by state.

The Occupational Safety, Health and Working Conditions (OSH) Code 2020 and the Code on Social Security 2020 have been passed by Parliament but are not yet fully notified or enforced as of 2025. The Factories Act 1948 and existing Shops and Establishments Acts therefore remain operative.

Where multiple statutes overlap, the provision most favourable to the employee applies. Employers using an EOR in India must account for this principle across every leave category.

Leave categories covered under Indian law include:

• Annual leave (earned/privilege leave)
• Public and festival holidays
• Sick leave and casual leave
• Maternity leave
• Paternity, bereavement, and other contractual leave

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Annual Leave (Earned / Privilege Leave)

The Factories Act 1948, Section 79, is the statutory source for earned leave entitlements. Adult workers accrue 1 day of leave for every 20 days worked, provided they have worked at least 240 days in the preceding calendar year. Workers under 18 accrue at a faster rate: 1 day for every 15 days worked.

The OSH Code 2020 retains the same accrual rates but reduces the eligibility threshold to 180 days. Because the Code is not yet enforced as of 2025, the 240-day threshold under the Factories Act 1948 currently applies.

Public holidays that fall within an approved leave period are excluded from the leave count under the Factories Act 1948. This means employees do not lose earned leave days to gazetted holidays.

Carry-forward is capped at 30 days under both the Factories Act 1948 and the OSH Code 2020. There is one exception: if an employer refuses a leave request, the unused days may be carried forward beyond the 30-day cap.

• Accrual rate (adults): 1 day per 20 days worked
• Accrual rate (under 18): 1 day per 15 days worked
• Eligibility threshold: 240 days (current); 180 days under OSH Code 2020 when enforced
• Carry-forward cap: 30 days, with an exception for employer-refused leave
• Encashment on separation: daily wage multiplied by number of unused earned leave days, a statutory right

Leave encashment on termination or resignation is a statutory entitlement. The payment is calculated as the daily wage rate multiplied by the number of unused earned leave days at the time of separation. Casual leave is a separate category and is covered in its own section.

Public Holidays

India mandates 12 public holidays per year under the Industrial Establishments (National and Festival Holidays) Act and its state-level variants. Three of these are compulsory national holidays: Republic Day (January 26), Independence Day (August 15), and Gandhi Jayanti (October 2).

State rules add further requirements. Tamil Nadu mandates 4 national holidays plus 5 festival holidays. Delhi requires 3 national holidays plus a minimum of 4 festival holidays. Employers should verify the applicable state schedule before finalising their leave calendar.

Beyond the 12 compulsory holidays, employees may select 2 to 3 restricted holidays per year from a state-approved list. These optional days let employees observe preferred festivals and do not count toward the compulsory holiday total. For a comparison of how other countries structure public holiday entitlements, see the leave policy in the UK.

Sick Leave

Sick leave in India is governed by a combination of state Shops and Establishments Acts, sector-specific legislation, and the Employees' State Insurance (ESI) Act 1948. The applicable rules depend on the employee's salary, industry, and state of employment.

Under the ESI Act, employees earning up to $220 (INR 21,000) per month qualify for a sickness benefit of up to 91 days across two consecutive benefit periods, paid at approximately 70% of average daily wages. This benefit is paid directly by the Employees' State Insurance Corporation (ESIC), not the employer, and is separate from any sick leave the employer grants under state law.

• Sector-specific rules apply in certain industries. Under the Working Journalists Act 1955, employees receive one month of sick leave per 18 months of service at half pay.
• The Sales Promotion Employees Act 1976 provides sick leave on production of a medical certificate, at half pay, calculated as one-eighteenth of the service period.
• Most state Shops and Establishments Acts do not allow sick leave to carry forward to the following year.
• A medical certificate is typically required when sick leave extends beyond 2 to 3 consecutive days.

Employers should confirm which state S&E Act applies to their workforce and whether ESI coverage is active, since the two entitlements operate independently and both may apply to the same employee.

Casual Leave

Casual leave is not governed by a single central statute. Each state's Shops and Establishments (S&E) Act sets the entitlement, and employer policy fills any remaining gaps.

Typical entitlement ranges from 7 to 12 days per year. Casual leave is distinct from sick leave, even in states where both are counted under a combined quota.

Notice requirements are flexible. Employees may apply on the same day or the day before in genuine emergencies. Unused casual leave generally lapses at year-end and cannot be carried forward.

Maternity Leave

Maternity leave in India is governed by two statutes: the Maternity Benefit Act, 1961 (MB Act) and the Employees' State Insurance Act, 1948 (ESI Act). The ESI Act applies to insured women earning up to $220 (INR 21,000) per month. Women not covered under ESI receive benefits under the MB Act.

Eligibility under the MB Act requires a minimum of 80 days of actual work in the 12 months immediately before the expected delivery date (Section 5, MB Act).

Under Section 5(5) of the Maternity Benefit Amendment Act, 2017, employers must consider allowing work from home after maternity leave where the nature of the work permits. Terms are mutually agreed. This is a statutory obligation to consider, not a discretionary benefit.

Central government female employees are eligible for up to 730 days of paid child care leave across their career, covering up to two children aged up to 18 years. Adopting mothers are eligible for up to one year of child care leave under the Central Civil Services Leave Rules.

Managing these obligations across multiple employees requires precise tracking of eligibility dates, ESI coverage status, and return-to-work terms. Understanding how does EOR work can help employers govern these statutory requirements without building local HR infrastructure.

Paternity Leave

India has no statutory paternity leave entitlement for private sector employees. The Paternity Benefit Bill has been proposed but has not been enacted as of 2025.

Central government employees are eligible for 15 days of paid paternity leave under the Central Civil Services (Leave) Rules. Private sector employers are not bound by any equivalent law.

In practice, many private employers voluntarily offer between 5 and 15 days of paid paternity leave as part of their HR policy. Employees should review their employment contract or company policy to confirm what, if any, entitlement applies to them.

Adoption and Surrogacy Leave

Adoption leave in India is governed by the Maternity Benefit Act, 1961. The entitlement applies to the adopting mother, not the adopting father.

To qualify for 12 weeks of paid leave, the adopted child must be under three months old at the time of adoption. If the child is older, no statutory entitlement applies under the Act.

Female employees of the central government have a broader option. Under the Central Civil Services Leave Rules, they may claim up to one year of child care leave for adopted children.

For surrogacy, the commissioning mother is entitled to 12 weeks of leave under the Maternity Benefit Act. The biological surrogate's entitlement is treated separately under applicable rules. Employers typically require supporting documentation, such as an adoption order or a surrogacy agreement, before processing leave.

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Bereavement Leave

India has no central statute mandating bereavement leave. Employers provide it at their discretion, typically granting 3 to 5 days of paid leave on the death of an immediate family member.

Immediate family generally includes a spouse, children, parents, and siblings, though the exact definition is set by employer policy. Central government employees may access special casual leave for bereavement under applicable service rules.

All bereavement leave terms, including duration and eligible relationships, must be documented in the employment contract or HR policy to avoid disputes.

Other Leave Types

Several leave categories in India fall outside statutory mandates but are widely used in practice. Employers should document each type clearly in HR policy.

Compensatory off (Comp-Off): Granted when employees work on public holidays or weekly offs. Industrial workers have a statutory basis under the Industrial Employment (Standing Orders) Act 1946. Most employers allow the equivalent days off within 30 to 60 days of the compensatory work day.

Leave without pay (LWP) / Loss of pay (LOP): Applies when an employee's leave balance is exhausted. Salary is deducted proportionately for each LOP day and must be reflected in payroll and Form 16. Some states require employer approval before LOP is granted. There is no statutory cap.

• Marriage leave: Not required by any central statute. Employers typically grant 3 to 15 days of paid leave, usually available once during the employment tenure.
• Restricted or optional holidays: Typically 2 to 3 days per year, selected by the employee from a state-approved list of festivals. These are distinct from the 12 compulsory public holidays and are governed by state-level industrial establishment acts.
• Study or sabbatical leave: No statutory mandate exists. Leave may be paid or unpaid at employer discretion and is usually available to employees with at least 3 to 5 years of tenure.

Each of these leave types should be defined in the employment contract or company HR policy, specifying eligibility, duration, and approval requirements.

State or Regional Variations in Leave Entitlements

State Shops and Establishments (S&E) Acts create meaningful variation in sick and casual leave entitlements across India. Employers must identify which state act governs each employee before setting leave policy. For comparison, see how leave policy in Germany handles regional variation at the federal level.

Factory workers are governed by the Factories Act 1948 regardless of the applicable state S&E Act. This distinction matters when a single employer operates both office and factory headcount in the same state.

Karnataka's menstrual leave provision grants one paid day per month to women employees. It applies to Karnataka-based employers and is not part of any central statute.

Carry-Forward and Leave Encashment Rules

Under the Factories Act 1948 and the OSH Code 2020, earned leave carry-forward is capped at 30 days. Unused days beyond that cap are forfeited unless the employer refused the employee's leave request, in which case the excess may be carried forward.

Casual leave does not carry forward. Under most state S&E Acts, any unused casual leave lapses at the end of the leave year. Sick leave follows the same rule: most state acts do not permit carry-forward of unused sick leave days.

Leave encashment on termination or separation is a statutory right under the Factories Act 1948 and the OSH Code 2020. The formula is straightforward: daily wage multiplied by the number of unused earned leave days. This right applies on cessation of employment and is not discretionary.

Encashment at retirement or resignation is governed by the applicable statute and the employer's policy. For non-government employees, encashment amounts are taxable under the Income Tax Act, subject to exemption limits. Mid-service encashment, where an employer pays out leave without the employee separating, is discretionary and not a statutory entitlement.

Tracking carry-forward balances and encashment liabilities across a distributed workforce requires consistent record-keeping. Employer of record software can centralize these calculations and reduce manual compliance risk for HR and Finance teams.

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Best Practices for Managing Leave Compliantly in India

Compliant leave management in India starts with identifying which statute governs each employee category before drafting any policy.

• Match the right statute to each employee category. Factory workers fall under the Factories Act 1948, commercial establishment workers under the applicable state Shops and Establishments Act, and journalists under the Working Journalists Act 1955. Where statutes overlap, apply the most favourable entitlement.
• Put entitlements in writing. Provide every employee with a written leave policy document that specifies each leave type, accrual rules, carry-forward caps, and encashment terms. Review and update it annually to reflect state-level changes.
• Document every request, approval, and refusal. Maintain records of all leave applications and outcomes. Documenting employer refusals of earned leave preserves the carry-forward exception under the OSH Code 2020.
• Offer above the statutory floor where it matters. Marriage leave, comp-off policies, and restricted holidays are not required by law but help retain talent. Employers benchmarking against markets such as the leave policy in the USA often find that discretionary leave types improve offer competitiveness. Record any additions in the employment contract or HR policy.

Managing Leave Policy in India with Gloroots

India's leave framework layers central statutes, state-level Shops and Establishments Acts, and pending Labour Code enforcement on top of one another. For employers managing distributed teams across multiple states, that overlap creates real compliance risk.

Gloroots configures statutory leave entitlements per employee category and state, calculates carry-forward balances and encashment amounts, integrates leave outcomes with payroll for accurate Loss of Pay deductions, and manages holiday calendars at the state level.

Employers without a local entity can use Gloroots EOR services to employ workers in India under a compliant employment structure. This is entity-free employment with local execution and centralized governance, covering contracts, statutory filings, and benefits from a single platform.

Gloroots provides Workforce Visibility and Reporting so HR and Finance teams maintain a clear view of leave liability across the entire India headcount, without building that infrastructure internally.

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Frequently Asked Questions About Leave Policy in India

How many days of annual leave are employees entitled to in India?

Under the Factories Act 1948, Section 79, employees earn 1 day of leave for every 20 days worked. This equals approximately 15 days per year. Eligibility begins after completing 240 days of employment in the preceding year.

The OSH Code 2020 will reduce that threshold to 180 days once enforced. Workers under 18 accrue at 1 day per 15 days worked. Public holidays that fall within a leave period are excluded from the leave count.

Are public holidays mandatory in India?

Yes. The Industrial Establishments (National and Festival Holidays) Act mandates a minimum number of public holidays. Republic Day (Jan 26), Independence Day (Aug 15), and Gandhi Jayanti (Oct 2) are compulsory for all establishments across India.

State-level acts determine additional festival holidays. Employees may also select 2 to 3 restricted or optional holidays per year from a state-approved list, based on personal religious observance.

Is there statutory paternity leave in India?

No central statute mandates paternity leave for private sector employees in India as of 2025. Central government employees receive 15 days of paid paternity leave under the Central Civil Services (Leave) Rules.

Private sector employees depend entirely on their employer's HR policy or employment contract. Many employers voluntarily offer 5 to 15 days of paid paternity leave. Employees should verify their contract terms before relying on this entitlement.

Can unused earned leave be encashed in India?

Yes. Under the Factories Act 1948 and the OSH Code 2020, if employment ends before an employee uses accrued earned leave, they receive cash compensation calculated as daily wage multiplied by unused earned leave days.

Encashment at retirement or resignation is also common, governed by the applicable statute and employer policy. Amounts received are taxable under the Income Tax Act, though exemption limits apply for non-government employees.

How much maternity leave is an employee entitled to in India?

Under the Maternity Benefit Act 1961, a female employee with fewer than two surviving children is entitled to 26 weeks of paid maternity leave. The eligibility condition is a minimum of 80 days of actual work in the 12 months before the expected delivery date.

Employees with two or more surviving children receive 12 weeks. The same 12-week entitlement applies for legal adoption of a child under three months and for commissioning mothers in surrogacy arrangements.

What is the carry-forward limit for earned leave in India?

Both the Factories Act 1948 and the OSH Code 2020 set a maximum carry-forward of 30 days for earned leave. Leave accrued beyond this cap is forfeited at year end.

One exception applies when an employer refuses a leave request. In that case, the OSH Code 2020 permits carry-forward beyond the 30-day limit. Employers should document all refusals to apply this exception correctly.

What happens when an employee runs out of leave in India?

Once all leave balances are exhausted, additional absence is treated as Leave Without Pay (LWP) or Loss of Pay (LOP). Salary is deducted proportionately for each LOP day and must appear in payroll records and Form 16.

LWP has no statutory cap, but some states require employer approval before it is granted. Employers should define LWP terms clearly in their HR policy to avoid disputes and ensure accurate payroll processing.