If you have just accepted a job offer or are reviewing your current employment contract, the leave clause is one of the most important sections to read carefully. India does not have a single uniform national leave law — your entitlement depends on which state you work in, which industry you are in, and which legislation applies to your employer. But the broad framework is consistent, and the new Labour Codes notified in 2025–2026 are bringing significant standardisation.
Here is a practical breakdown of every leave type, what the new codes change, and how to calculate what you are owed.
Types of Leave in India for Private Sector Employees
Most salaried employees in India are entitled to three core types of leave under state-level Shops and Establishments Acts or the Factories Act:
Earned Leave (EL) — Also Called Annual Leave or Privilege Leave
Earned leave is the most valuable leave type because it is the only one you can carry forward to the next year and encash when you resign or retire.
- Accrual rate: 1 day for every 20 days worked (under the new OSH Code, operative from 2026). Under older state acts, this was often 1 day per 20 or 26 days.
- Eligibility: Under the new code, an employee must complete 180 days of continuous service in a calendar year to qualify — down from the earlier 240-day requirement under the Factories Act.
- Carry-forward cap: Up to 30 days maximum under the OSH Code. Days beyond this must be encashed.
- Encashment: Allowed on resignation, retirement, or at the employer’s option during service (though during-service encashment is fully taxable).
Practical example: If you work 300 days in a year, you earn 15 days of EL. If you had 20 days carried forward, you now have 35 days. Only 30 can carry forward; the remaining 5 must be encashed.
Casual Leave (CL)
Casual leave covers unexpected, short-duration absences — a medical appointment, a family emergency, a utility breakdown.
- Typical entitlement: 7–12 days per year depending on the state. Delhi grants 12 days; Maharashtra, 8 days; Karnataka, 12 days.
- Maximum at a stretch: Usually 3 consecutive days. Beyond this, employers may ask you to convert to earned leave.
- Carry-forward: Not permitted. Casual leave lapses at year-end (December 31 for most companies or March 31 for companies following a financial-year leave calendar).
- Encashment: Not allowed under any circumstances.
- Clubbing: In most states, casual leave cannot be combined with earned leave or sick leave in a single application.
Sick Leave (SL)
Sick leave is meant for health-related absences, and proof requirements vary by employer.
- Typical entitlement: 6–12 days per year. Delhi: 15 days; Tamil Nadu: 12 days; Maharashtra: under the Shops Act, 7 days.
- Medical certificate: Usually required for absences beyond 3 consecutive days, though many companies ask for one from day one.
- Carry-forward: Not permitted under most state Shops Acts. Sick leave lapses annually.
- Encashment: Not available.
Public Holidays and Restricted Holidays
Separate from CL/EL/SL, all employees are entitled to public holidays as declared by the state government. Most states mandate 3 national holidays (Independence Day, Republic Day, Gandhi Jayanti) as compulsory paid holidays. Additionally, companies typically offer a list of 5–10 restricted holidays from which employees may choose a fixed number per year (often 2).
Maternity Leave (Women Employees)
Already covered in depth in our complete maternity leave guide, but briefly:
- Entitlement: 26 weeks for the first two children; 12 weeks for the third child onwards.
- Eligibility: 80 days of service with the same employer in the preceding 12 months.
- Coverage: Applies to establishments with 10 or more employees.
- Adoptive and commissioning mothers are entitled to 12 weeks under the Code on Social Security 2020 (in force from November 2025).
State-Wise Leave Entitlement Summary (Private Sector, 2026)
| State | Earned Leave | Casual Leave | Sick Leave | Total (approx.) |
|---|---|---|---|---|
| Delhi | 15 days | 12 days | 15 days | 42 days |
| Maharashtra | 21 days | 8 days | 7 days | 36 days |
| Karnataka | 12 days | 12 days | 12 days | 36 days |
| Tamil Nadu | 12 days | 12 days | 12 days | 36 days |
| Telangana | 15 days | 12 days | 12 days | 39 days |
| Uttar Pradesh | 15 days | 10 days | 12 days | 37 days |
Note: These are statutory minimums under applicable state Shops and Establishments Acts. Many employers — especially large IT, BFSI, and consulting firms — provide more generous leave, including paternity leave, bereavement leave, and wellness days.
New Labour Codes 2026 — What Is Changing for Employees
The four Labour Codes (Wage Code, Industrial Relations Code, Social Security Code, and OSH&WC Code) have been notified at the central level. While state-level rules are still being finalised in several states, here is what the leave-related changes mean for you when fully implemented:
1. Easier eligibility for earned leave. The qualifying threshold drops from 240 days to 180 days of service in a year. This is especially significant for contractual employees and those who joined mid-year.
2. 30-day carry-forward cap standardised. Currently, carry-forward limits vary widely — from 15 days in some states to 45 days in others. The OSH Code creates a uniform 30-day cap, with mandatory encashment of excess.
3. Protected carry-forward on employer refusal. If an employer rejects your leave application, those days cannot be forfeited — they must be carried forward without counting against the normal cap. This is a new employee-protection provision.
4. No change to maternity leave — that remains governed by the Maternity Benefit Act, 1961 as amended in 2017, and the Code on Social Security 2020.
Leave Encashment Rules in India 2026
Leave encashment is money paid to you in lieu of unused earned leave. You can receive it in two ways: during service (at employer discretion, usually during festive seasons) or on separation (resignation, retirement, or retrenchment). The tax treatment is very different.
Encashment Calculation Formula
Encashment amount = (Basic Salary + Dearness Allowance) ÷ 30 × Number of EL days
Only Basic + DA are used in the formula. HRA, house rent, special allowances, variable pay, and other CTC components are excluded.
Example: If your Basic + DA is ₹40,000/month and you have 45 EL days accumulated:
₹40,000 ÷ 30 × 45 = ₹60,000
Tax Exemption — The ₹25 Lakh Limit (Section 10(10AA))
| Employee type | Tax treatment on separation (resignation/retirement) | During service |
|---|---|---|
| Central/state government | Fully exempt, no cap | Fully taxable |
| Private sector | Exempt up to ₹25 lakh (lifetime aggregate) | Fully taxable |
Key points:
- The ₹25 lakh ceiling was raised from ₹3 lakh in April 2023 and remains unchanged for FY 2026-27.
- This is a lifetime aggregate — not per-employer. If you received ₹10 lakh exempt at a previous employer, only ₹15 lakh remains available at the next.
- The ₹25 lakh exemption applies under both the old and new tax regimes.
- For the exemption formula, the calculation caps earned leave at 30 days per completed year of service, regardless of how many days your employer actually grants.
What to Check in Your Offer Letter or Appointment Letter
Before accepting any job offer in India, review these five leave-related clauses:
- Total leave quantum — How many EL, CL, and SL days are offered? Is it above the statutory minimum?
- Leave year — Does the company follow a calendar year (Jan–Dec) or financial year (Apr–Mar)? This affects lapse dates.
- Carry-forward and encashment on exit — Some companies cap encashment at 15–20 days regardless of accumulated balance. Know the policy before you resign.
- Clubbing restrictions — Can you combine CL and EL for a longer holiday? Many companies allow this; some do not.
- Negative leave / advance leave — Does the company allow you to go negative on leave balance, or does absence beyond balance trigger Loss of Pay (LOP)?
If your offer letter is vague on any of these, ask HR for the detailed leave policy document before your Day 1.
Frequently Asked Questions
Q: How many total leaves do private sector employees get in India per year?
Most private sector employees get between 24 and 42 paid leave days per year, combining earned leave (12–21 days), casual leave (7–12 days), and sick leave (6–15 days), depending on the state. This is in addition to public holidays declared by the state government, typically 10–15 per year.
Q: Can I encash my casual leave or sick leave when I resign?
No. Only earned leave (also called privilege leave or annual leave) is encashable. Casual leave and sick leave lapse at year-end and cannot be converted to cash at any time.
Q: Is leave encashment taxable in India?
Leave encashment received during active service is fully taxable. If received at the time of resignation or retirement, private sector employees can claim an exemption of up to ₹25 lakh under Section 10(10AA) of the Income Tax Act — across all employers, as a lifetime aggregate.
Q: What changes does the new Labour Code bring to my leave entitlement?
The most significant change is that the eligibility threshold for earned leave drops from 240 working days to 180 working days in a calendar year. This helps contractual workers and mid-year joiners qualify sooner. The carry-forward cap is also standardised at 30 days. Full implementation depends on your state notifying the rules.
Q: My employer rejected my leave — can they cancel the days?
Under the new OSH Code, if an employer rejects your leave application, those days are protected — they must be carried forward and cannot be forfeited. This is a new employee-protection provision that prevents arbitrary leave lapse.
Q: Does my company have to give me more than the statutory minimum leave?
No — companies are legally required to meet the statutory minimum. Anything above that is a company policy benefit. When evaluating job offers, always compare the total leave package (including work-from-home policy and comp-off policy) not just the leave count.
Q: I have been working for 6 months at my company. Am I eligible for earned leave?
Under the new Labour Codes: if you have worked 180 days in the calendar year, yes. Under many existing state Shops Acts still in force, 240 days is required — which means a mid-year joiner may only become eligible in their second calendar year. Check which law applies to your employer (Factories Act, Shops Act, or the new OSH Code once your state notifies the rules).
CTA
Looking for a job that respects your leave rights?
At ePeople India, every employer on our platform pays the placement fee — you never pay anything to find work. Browse verified jobs, apply directly, and join employers who follow fair labour practices.
👉 Find Jobs — Zero Placement Fees
👉 Post a Job — Reach Qualified Candidates
Srikanth has 8+ years in HR compliance and workforce advisory across India’s manufacturing and IT sectors. This article reflects central and state-level laws as of June 2026. As state-level Labour Code rules continue to be notified, specific details may vary — always verify with your state’s Shops and Establishments Act or HR department.
