Sample values shown (₹30,000 wages, 15 OT hours). Change them to get your own number.
How Overtime Pay Works in India
Since 21 November 2025 the Occupational Safety, Health and Working Conditions Code, 2020 (OSH Code) has replaced the Factories Act, 1948, and the Code on Wages, 2019 requires overtime at not less than twice the normal rate of wages (Section 14). Offices and shops are still largely governed by state Shops and Establishments Acts and the rules each state notifies. In both cases the usual statutory floor is twice the ordinary rate for overtime hours.
The Core Formula
OT Hourly Rate = Hourly Rate x Overtime Multiplier (2x for India standard)
Total OT Pay = OT Hourly Rate x OT Hours Worked
Standard example (26 days, 8 hours/day):
Hourly Rate = Monthly Wages / 208
OT Pay = (Monthly Wages / 208) x 2 x OT Hours
Factory workers: Factories Act Section 59 and the OSH Code
Under Section 59 of the Factories Act, a worker who worked beyond 9 hours in a day or 48 hours in a week was entitled to overtime at twice the ordinary rate of wages. Section 27 of the OSH Code carries the same twice-the-rate rule forward and adds that overtime needs the worker’s consent. Before January 2026, most employers computed "ordinary rate" on Basic plus DA only. The Supreme Court's January 19, 2026 ruling changed this: ordinary rate now means all allowances the worker is entitled to, with only bonus and overtime wages excluded.
Work beyond the daily or weekly limit (48 hours a week); daily limits and spread-over are set by the rules your state notifies.
2x the ordinary rate of wages, with the worker’s consent (OSH Code Section 27).
Set by rules: 50 hours (75 with exemption) under the old Factories Act; states are notifying new limits under the OSH Code, so check your state.
Old Factories Act limits were 12 hours a day and 60 hours a week including OT; confirm the limits in your state’s OSH rules.
January 2026 Supreme Court Ruling
In its January 2026 judgment in Union of India v. Heavy Vehicles Factory Employees’ Union, the Supreme Court clarified that Section 59(2) of the Factories Act uses the phrase "ordinary rate of wages," which includes basic wages plus all allowances to which the worker is entitled. The only exclusions are bonus (as defined under the Payment of Bonus Act / Code on Wages) and overtime wages themselves.
Practically, this means employers who were calculating overtime on Basic plus DA only and excluding HRA, conveyance, or special allowances from the wage base were potentially underpaying overtime to factory workers. The judgment interprets Section 59 of the Factories Act; the codes use their own definition of wages, so how it carries over to overtime under the OSH Code is still being worked out. Take advice before changing your payroll base.
Shops and Establishments Act (Office and IT Workers)
White-collar, IT, and service-sector employees are typically covered by their respective state Shops and Establishments Act, not the Factories Act. Each state has its own act, but most share a similar 2x OT pay requirement. The figures below are compiled from state acts and have not all been checked against the latest state rules (unverified):
| State | OT Trigger | OT Rate | Max OT per Quarter |
|---|---|---|---|
| Delhi | More than 9 hrs/day or 48 hrs/week | 2x | 150 hours per year (approx 37.5/quarter) |
| Maharashtra | More than 9 hrs/day or 48 hrs/week | 2x | 125 hours per quarter |
| Karnataka | More than 9 hrs/day or 48 hrs/week | 2x | 50 hours per quarter |
| Tamil Nadu | More than 9 hrs/day or 48 hrs/week | 2x | 50 hours per quarter |
| Telangana | More than 9 hrs/day or 48 hrs/week | 2x | 50 hours per quarter |
| Others | Generally 9 hrs/day or 48 hrs/week | 2x (most states) | Varies: typically 50 to 150 hrs |
Worked Examples
Example 1: Factory worker, after the January 2026 SC ruling (the calculator sample)
Monthly gross wages (Basic + HRA + Special Allowance, excluding bonus) = Rs 30,000. Working month: 26 days, 8 hours/day. OT hours: 15.
OT Hourly Rate = 144.23 x 2 = Rs 288.46
OT Pay = 288.46 x 15 = Rs 4,326.92
Example 2: Old method (Basic + DA only), same worker
If Basic + DA = Rs 15,000 out of the Rs 30,000 total:
OT Pay = 72.12 x 2 x 15 = Rs 2,163.46
The old method pays Rs 2,163 less on 15 OT hours. Under the ruling’s reading, the entitlement in this case doubles.
Example 3: IT employee under Shops Act (9-hour day)
Monthly salary = Rs 50,000. Standard working: 26 days, 9 hrs/day. OT hours: 8.
OT Pay = 213.68 x 2 x 8 = Rs 3,418.80
Tax Treatment of Overtime Pay
Overtime pay is fully taxable as salary income under the Income-tax Act, 2025 (which replaced the 1961 Act from 1 April 2026). It is added to the employee's salary for the tax year in which it is received and taxed at the applicable slab rate. TDS under Section 392 (earlier Section 192) applies in the month the OT payment is made. There is no special exemption for overtime pay (unlike certain allowances under the old tax regime).
OSH Code 2020 (Occupational Safety, Health and Working Conditions Code)
The OSH Code 2020 came into force on 21 November 2025 and replaced the Factories Act and twelve other statutes. It keeps overtime at twice the rate of wages and makes overtime subject to the worker’s consent (Section 27). Weekly hours stay at 48. Quarterly overtime caps are fixed by rules: central rules were notified in 2026, and states are notifying their own, so the cap that applies to you depends on your state. Until your state notifies new limits, check with its labour department which limit it is enforcing.
Related tools
- Minimum wage calculator: check the minimum wage that sets the floor for the ordinary rate.
- Loss of pay calculator: work out deductions for unpaid days.
- Salary slip generator: show OT as a separate line on the payslip.
- Income tax calculator: see the tax on overtime added to salary.
Hiring shift staff to cut overtime? AI resume screening can help fill roles faster.
Sources
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Frequently Asked Questions
What is the overtime pay rate in India?
Twice (2x) the ordinary rate of wages. Section 14 of the Code on Wages, 2019 and Section 27 of the OSH Code, 2020, both in force since 21 November 2025, set overtime at twice the rate, as Section 59 of the Factories Act did before them. Most state Shops and Establishments Acts also require 2x pay for work beyond normal hours. Some employment contracts provide 1.5x, but that is contractual and may not satisfy the statutory minimum.
How is the hourly rate for overtime calculated?
The standard formula is: Hourly Rate = Monthly Wages divided by (Working Days per Month multiplied by Standard Hours per Day). For a 26-day, 8-hour working month, this equals Monthly Wages divided by 208. Overtime pay then equals Hourly Rate multiplied by 2 multiplied by OT hours worked.
What did the January 2026 Supreme Court ruling change?
In January 2026, in Union of India v. Heavy Vehicles Factory Employees’ Union, the Supreme Court held that "ordinary rate of wages" under Section 59 of the Factories Act includes basic wages plus ALL allowances (HRA, special allowance, conveyance, etc.), not just basic and dearness allowance. Only bonus and overtime wages themselves are excluded. Employers who calculated OT on basic+DA alone may have been underpaying factory workers and should review past payroll.
How many overtime hours can a factory worker legally work?
It depends on your state. The old Factories Act capped overtime at 50 hours a quarter (75 with a state exemption), with total hours up to 12 a day and 60 a week. The OSH Code, in force since 21 November 2025, leaves the quarterly cap to rules made by the central and state governments, and overtime now needs the worker’s consent. Check the limit your state has notified.
Does overtime law apply to IT and software employees?
IT and software employees working in offices are typically covered by their state's Shops and Establishments Act, not the Factories Act. Most Shops Acts also require 2x overtime pay. However, some states explicitly exempt managerial, supervisory, or confidential-role employees from overtime provisions. Check your employment contract and the applicable state Act for specifics.
Is overtime pay taxable in India?
Yes, fully. Overtime pay is treated as salary income under the Income-tax Act, 2025 and is taxed at the employee's applicable slab rate in the tax year it is received. TDS under Section 392 (earlier Section 192) is deducted in the month the OT payment is made. No special exemption applies to overtime pay.
What is included in "wages" for overtime calculation?
After the January 2026 Supreme Court ruling, for factory workers the wage base for overtime is all wages and allowances the worker is entitled to, excluding only bonus (as defined under the Payment of Bonus Act / Code on Wages) and the overtime wages themselves. This typically means: Basic + DA + HRA + Special Allowance + Conveyance + any other regular allowances. Employer PF contributions, gratuity contributions, and reimbursements are excluded.
Can an employer make employees sign away their overtime rights?
No. Statutory overtime rights under the labour codes and Shops Acts are minimums that a private contract cannot waive. Any agreement to work overtime without the legally mandated 2x pay is not enforceable. Employers can, however, negotiate a higher overtime rate above the 2x statutory floor.
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Disclaimer: Overtime rates follow the OSH Code 2020, the Code on Wages 2019, the January 2026 Supreme Court reading of the Factories Act, and applicable state Shops & Establishments rules. Values are estimates only and do not constitute legal advice.