Leave Entitlements in India 2026: Earned Leave, Sick Leave, Casual Leave & Encashment Rules
Meta title: Leave Entitlements India 2026: Earned Leave, Sick Leave & Casual Leave Rules
Meta description: Know your leave rights in India 2026. Complete guide to earned leave, sick leave, casual leave, carry-forward, encashment rules, and special provisions for working women.
Slug: leave-entitlements-india-2026-earned-sick-casual-leave-rules
Author: Sid
Category: Employee Rights
Tags: leave policy India, earned leave, sick leave India, casual leave rules, employee rights India 2026
Focus keyword: leave entitlements India 2026
Word count: ~1,900
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Indian law gives every employee the right to paid leave — but the exact number of days depends on which law covers your employer, which state you work in, and how long you’ve been on the job. In most private-sector roles covered by state Shops & Establishments Acts, you’re looking at 18 days of earned leave, 7 casual leave days, and 7 sick leave days per year as a baseline, though the OSH Code now standardises accrual nationally for new establishments.
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Why There’s No Single “National Leave Policy” in India
If you’ve ever asked HR how many leaves you get and received a vague answer, this is why: India’s leave entitlements are spread across several overlapping laws.
– Factories Act, 1948 — applies to industrial workers in registered factories
– State Shops & Establishments Acts — applies to most office, retail, and service-sector employees; each state has its own version
– Occupational Safety, Health & Working Conditions (OSH) Code, 2020 — fully operational as of April 2026; consolidates and partly standardises leave rules for establishments going forward
– Central Government Service Rules — applies to central government employees (most generous provisions)
The result: a software engineer in Bengaluru and a factory worker in Pune are covered by different laws, earn leave at different rates, and have different carry-forward limits. The OSH Code is gradually harmonising this, but state laws still apply to older establishments.
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The Three Core Leave Types Explained
1. Earned Leave (EL) — Also Called Privilege Leave (PL)
Earned leave is the most valuable type because it’s the only one you can carry forward and encash.
Accrual rate:
– Under the Factories Act and the OSH Code: 1 day of EL for every 20 days worked (adults)
– Workers under 18 in factories: 1 day per 15 days worked
– Under most state Shops & Establishment Acts: 18 EL days per year (some states like Maharashtra grant more)
Eligibility: You must complete 240 days of continuous service in your first year before earned leave kicks in. Once eligible, leave accrues from the following January 1 (or April 1, depending on your employer’s leave year).
Carry-forward: Under the Factories Act, unused EL can be carried forward to the next year, subject to a cap of 30 days. Maharashtra’s Shops & Establishments Act allows 45 days. Central government employees can accumulate up to 300 days.
Encashment: You can encash earned leave in three situations — while still employed (if your company policy permits), at resignation, and at retirement. The formula:
> Leave encashment = (Basic Salary + DA) ÷ 30 × number of unutilised EL days
Note: the calculation uses Basic + DA, not your full CTC. If you’re earning ₹60,000 basic and have 20 days of unused EL, the encashment is approximately ₹40,000 before tax.
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2. Casual Leave (CL)
Casual leave covers short, unplanned absences — a medical appointment, a family emergency, a day when you simply can’t make it in.
Standard entitlement: Most state Shops & Establishments Acts mandate a minimum of 7 casual leave days per year. Some states grant more; a few are silent on CL altogether, relying on industry practice.
Rules:
– Maximum 3 consecutive days at a time in most states
– Cannot be combined with earned leave in most companies (they treat them as separate buckets)
– Cannot be carried forward to the next year — unused CL lapses on December 31 (or March 31, if your leave year runs April–March)
– Cannot be encashed — ever. If you resign with 5 unused CL days, you get nothing for them
Practical note: Because CL lapses at year-end, many employees try to use it in November–December. If you see a sudden rush of leave applications in your team then, this is why.
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3. Sick Leave (SL)
Sick leave is for medical illness and, in theory, requires a doctor’s certificate for absences beyond a day or two (though most companies only ask for one after 3+ consecutive days).
Standard entitlement: The Shops & Establishments Act baseline is 7 sick leave days per year, though this varies by state. Factory workers covered under the Employees’ State Insurance (ESI) scheme have a different setup — ESI provides sickness benefit (cash compensation at roughly 70% of wages) rather than company-paid sick leave.
Rules:
– Cannot be carried forward
– Cannot be encashed
– Lapses at end of the calendar year
– Employees under ESI coverage (wages up to ₹21,000/month) claim sickness benefit through ESI, not through the employer’s SL balance
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Leave Summary: Quick Reference Table
| Leave Type | Typical Days (Private Sector) | Carry Forward | Encashable |
|—|—|—|—|
| Earned / Privilege Leave | 18 days/yr (accrual: 1 per 20 days) | Yes, up to 30 days | Yes |
| Casual Leave | 7 days/yr | No — lapses | No |
| Sick Leave | 7 days/yr | No — lapses | No |
| Maternity Leave | 26 weeks (1st & 2nd child) | N/A | No |
| Public Holidays | 3 national + 14 gazetted | No | No |
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Leave Encashment: Tax Rules for 2026
Encashing leave has tax implications that most employees only discover at resignation.
During active employment: Fully taxable as salary income in the year received.
At resignation or retirement (non-government employees): Exempt under Section 10(10AA) of the Income Tax Act, up to a lifetime limit of ₹25 lakh across all employers. The ₹25 lakh cap was revised upward in 2023 and remains in force in 2026.
Exemption is calculated as the least of:
1. ₹25 lakh (lifetime aggregate)
2. Actual encashment amount
3. (Basic + DA) ÷ 30 × 30 days × completed years of service
4. Cash equivalent of unutilised EL (maximum 30 days per year of service)
Government employees: The entire encashment amount at retirement is exempt — no ₹25 lakh cap applies.
Practical tip: If you have accumulated leave close to retirement or a long-service exit, the tax-free encashment can be substantial. Don’t negotiate it away as part of a settlement without running the numbers.
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Special Leave Provisions You Should Know
Maternity Leave
Covered in detail in our [Maternity Leave India 2026 guide](https://epeopleindia.com/maternity-leave-india-2026-complete-rights-guide/), but in brief: 26 weeks paid leave for the first two children, 12 weeks for the third, 12 weeks for adoptive mothers (child up to 3 months old), and 6 weeks in cases of miscarriage. Applies to establishments with 10 or more employees.
Paternity Leave
India has no statutory paternity leave law for private sector employees as of 2026. Central government employees get 15 days. Several large employers — Zomato, Swiggy, Meesho — have introduced gender-neutral parental leave of 26–30 weeks voluntarily. If paternity leave matters to you, ask about it explicitly during offer negotiations.
Public and Gazetted Holidays
Three national holidays are compulsory for all employees: Republic Day (26 Jan), Independence Day (15 Aug), and Gandhi Jayanti (2 Oct). Beyond these, the Central Government declares 14 restricted gazetted holidays per year; state governments add their own. Employees are typically allowed to choose 2 restricted holidays. In practice, most employers give 10–12 fixed holidays in addition to the three national ones.
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When Your Employer Can Refuse Leave
Leave is a right, but timing is not always within your control.
– Earned leave requires advance notice (company policy varies, but 7–15 days is common). Employers can defer it if operational requirements demand it, provided they reschedule.
– Casual leave should be granted as applied unless there’s a genuine workload reason; refusing CL for no reason is not standard practice and can be challenged.
– Sick leave — if you’re ill, you can notify the same day. Requiring advance notice for sick leave is legally questionable.
– Leave without pay (LWP) — if all your balances are exhausted, you can request LWP. The employer can agree or refuse; it’s discretionary.
If your employer is regularly denying leave or deducting salary for leaves you’re entitled to, that is a violation of the applicable Shops & Establishments Act. You can file a complaint with the state Labour Department.
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FAQ: Leave Entitlements in India 2026
Q: Can my employer take away my earned leave if I resign without giving notice?
No. Accrued earned leave is a statutory entitlement. Employers cannot forfeit it as a penalty for short notice. They may adjust the encashment against notice period recovery if both amounts are in play, but the leave itself cannot be simply cancelled.
Q: What happens to my CL and SL if I quit in August?
Both lapse without encashment. You receive zero payment for unused casual leave or sick leave at exit. Only earned leave is encashable.
Q: My company gives me 12 EL days per year. Is this legal?
It depends on your applicable law. If you’re a factory worker under the Factories Act, you should earn 1 day per 20 days worked — roughly 15 days assuming 300 working days, so 12 may be below the statutory minimum. For Shops & Establishments Act employees, most states mandate 18 days. 12 days likely puts your employer in violation; verify against your state’s specific Act.
Q: How is leave calculated for part-year employees?
Leave accrues proportionally. If you join in July and the leave year is January–December, you accrue leave for the remaining months only. The 240-day qualifying period applies in full in your first year, so you may not be eligible for EL until your second year.
Q: Does working on a Sunday or public holiday count toward earned leave accrual?
Under the Factories Act, weekly rest days and paid holidays are included in the 240-day qualifying count. Actual working days, weekly off days, and holidays all count toward the threshold — not just the days you’re physically present.
Q: Can my employer force me to take leave?
Yes, under certain conditions. The Factories Act allows employers to require workers to take earned leave if the accumulated balance exceeds the carry-forward limit. Most companies use a “use-it-or-lose-it” policy for casual leave near year-end.
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Know Your Leave Rights Before You Accept a Job Offer
Leave policy is one of the first things to clarify in a job offer. Most offer letters only mention total leaves without distinguishing between EL, CL, and SL — and those distinctions matter significantly at exit.
Before you sign:
– Ask for the breakdown: how many EL, CL, and SL days per year
– Confirm the carry-forward and encashment policy
– Ask if the company has special provisions for women — crèche access, work-from-home options post-maternity
– Confirm what happens to accrued leaves on resignation
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Written by Sid | e People India | Last updated: June 2026
This article is for informational purposes. Leave law varies by state and establishment type. Consult a labour law professional for advice specific to your situation.
