How earned leave is calculated in India (2026 rules)
Earned leave is the paid annual leave you accrue by working. Three sets of rules can apply depending on where you work: the new central Labour Code, the older Factories Act it replaced, and the Shops and Establishments Act of your state. The formula is similar across all three, but the qualifying threshold, the annual quota and the carry forward cap differ, and that is where most payroll disputes start.
1. The Labour Code formula (in force from 21 Nov 2025)
Section 32 of the Occupational Safety, Health and Working Conditions Code, 2020 sets the central baseline for factories, mines, plantations, and other covered establishments (broadly those with 10 or more workers):
- Threshold: 180 days worked in the calendar year (down from 240 under the Factories Act).
- Rate: 1 day per 20 days for adults. 1 day per 15 days for adolescents and workers employed below ground in a mine.
- What counts toward 180: lay off, maternity leave and annual leave already availed. These days count for eligibility but earn no new leave.
- Holidays inside a leave spell (including prefixed or suffixed holidays) are not deducted from your leave.
- Mid year joiners qualify if they work at least one fourth of the days left in the year after joining.
2. Carry forward and encashment
- Carry forward cap: 30 days. Unused leave rolls over to the next calendar year up to this limit (OSH Code s.32(1)(vii)).
- Refused leave: if you applied for leave and the employer refused it, that leave carries forward without any limit.
- Excess is encashed, not lapsed: any balance above 30 days at year end must be encashed under s.32(1)(ix). A "use it or lose it" clause cannot override this for statutory leave.
- Encash on demand: a worker may ask for encashment of leave at the end of any calendar year (s.32(1)(viii)).
- On exit: on resignation, dismissal, retirement or death the worker or nominee gets wages in lieu of all leave earned to date, even if the 180 day threshold is not met. Payment is due within 2 working days of resignation or dismissal, and within 2 months of superannuation or death.
Tax on encashment is a separate topic, see our leave encashment calculator for the exemption under Section 19 of the Income-tax Act, 2025 (earlier Section 10(10AA)).
3. Factories Act, 1948 (Section 79): the legacy rule you will still see in policies
Before the Labour Codes, Section 79 gave adult workers 1 day per 20 days worked (1 per 15 for children) but only after 240 days of work in the previous calendar year, with the leave credited in the following year and a 30 day carry forward cap (40 for children). Many HR policies, standing orders and state rules still quote the 240 day figure. The OSH Code repealed the Factories Act, but the Centre has said existing rules continue to apply during the transition until the corresponding rules under the Codes are notified, and states are aligning their own rules at different speeds. If your employer still applies 240 days, switch the calculator to the legacy threshold to see the difference, and check with your HR which rule your establishment has adopted. This is why the page carries both toggles rather than assuming one.
4. State Shops and Establishments Acts: offices, shops, IT and services
The Labour Codes did not subsume the state Shops and Establishments Acts, so if you work in an office, store, restaurant, hospital, IT company or similar establishment, your state's Act usually governs your leave. Each state writes its own quota and accumulation cap. The figures below are indicative, cross checked across two compliance sources, and some states are mid way through amendments, so treat them as a starting point and edit the preset if your Act says otherwise.
| State | Earned / privilege leave | Max accumulation |
|---|---|---|
| Maharashtra | 1 day per 20 days worked (after 240 days in the year) | 45 days |
| Karnataka | 1 day per 20 days worked | 30 days (some sources report 45 after amendment) |
| Delhi | 15 days per year | 45 days |
| Tamil Nadu | 12 days per year | 24 days (some sources report 45) |
| Telangana / Andhra Pradesh | 15 days per year | 60 days |
| Gujarat | 1 day per 20 days worked | 63 days |
| Uttar Pradesh | 15 days per year | 45 days |
| Madhya Pradesh | 30 days per year | 90 days |
| Rajasthan | 18 days per year | 30 days |
| West Bengal | 14 days per year | 28 days |
| Kerala | 12 days per year | 24 days |
| Haryana / Punjab | 1 day per 20 days worked | 30 days |
| Bihar / Jharkhand | 1 day per 20 days worked | 45 days |
Casual leave and sick leave are separate quotas under most state Acts (typically 7 to 12 days each) and usually do not accumulate. Where a state rule and the Labour Code differ, the more beneficial provision for the employee prevails.
Worked example (the sample values): factory worker, full year
Ravi works in a Pune factory. In 2026 he actually works 288 days, takes 10 days of earned leave from a 12 day opening balance, and is on lay off for 6 days. Basic + DA is Rs 24,000 a month.
- Eligibility: 288 worked + 6 lay off + 10 EL availed = 304 counted days, well above 180 (and above the legacy 240).
- Leave earned: 288 ÷ 20 = 14.4, so 14 days (only days actually worked earn leave).
- Closing balance: 12 + 14 − 10 = 16 days. That is under the 30 day cap, so all 16 carry forward and nothing is encashed compulsorily.
- Cash value if he resigns on 31 December: 16 × (24,000 ÷ 30) = 16 × 800 = Rs 12,800, payable within two working days.
Now suppose his opening balance was 30 and he took no leave: closing = 30 + 14 = 44, carry forward = 30, and 14 days (Rs 11,200) must be encashed at year end.
Frequently asked questions
How is earned leave calculated in India?
Under Section 32 of the OSH Code, 2020 (in force from 21 November 2025), a worker who has worked 180 days or more in a calendar year earns one day of leave for every 20 days actually worked (one per 15 days for adolescents and below-ground mine workers). The Factories Act used the same rate but a 240-day threshold. Office, retail and IT staff are often covered by their state Shops and Establishments Act instead.
What is the earned leave carry forward limit?
30 days for adult workers under the OSH Code, as under the Factories Act. State Shops and Establishments Acts set their own accumulation ceilings, commonly between 24 and 63 days. Leave you applied for but were refused can be carried forward without limit under the OSH Code.
What happens to earned leave above 30 days?
Under the OSH Code, a worker whose balance exceeds the 30-day carry forward limit at the end of the calendar year is entitled to encash the excess. It cannot simply lapse. A worker can also ask for encashment of leave at the end of a calendar year.
Which days count as days worked for earned leave?
For the 180-day test, days actually worked plus lay-off, maternity leave and earned leave already availed are counted. Leave is earned only on days actually worked, so lay-off, maternity and leave days help you qualify but do not themselves earn new leave.
I joined in the middle of the year. Do I get earned leave?
Yes, if you have worked at least one fourth of the calendar days remaining in the year after your joining date. Tick the joined after 1 January box and enter the days remaining, and the calculator applies this test instead of the 180-day one.
Is earned leave paid out on resignation or termination?
Yes. If a worker is discharged, dismissed, resigns, retires or dies, the worker or nominee gets wages for all leave earned up to that date, even if the 180-day period is not complete. Payment is due by the second working day after discharge, dismissal or resignation, and within two months of superannuation or death.
How is the cash value of earned leave calculated?
Leave wages are the wages you would have earned on those days, normally basic + DA. Most employers divide monthly basic + DA by 30 for a per-day rate; some use 26 or the actual days in the month. Tax on encashment at exit is covered by Section 19 of the Income-tax Act, 2025 (earlier Section 10(10AA)).
Does this calculator apply to casual leave or sick leave?
No. Casual and sick leave are separate quotas under state Shops Acts and company policy, usually 7 to 12 days each and generally not accumulating. This tool is only for earned, privilege or annual leave.
Sources
- Occupational Safety, Health and Working Conditions Code, 2020 (full text; Section 32 on annual leave)
- PIB: Government makes the four Labour Codes effective (21 November 2025)
- Ministry of Labour and Employment: FAQs on Labour Codes
- Ministry of Labour and Employment: Compliance handbook for employers under the four Labour Codes
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Start hiring freeThis calculator is for information only and is not legal advice. Statutory figures are from Section 32 of the OSH Code, 2020, Section 79 of the Factories Act, 1948 and state Shops and Establishments Acts as understood in September 2026, and state rules are being amended as the Labour Codes roll out. Spotted a wrong value? Email [email protected] and we will fix it.