Leave Laws in India 2026: Rules, State Entitlements, and Compliance
Table of Contents
Leave in India is not one law. It is a web of central Acts and state-specific rules, where what is mandatory in Maharashtra may not apply in Karnataka, and what the Factories Act grants a factory worker differs from what a Delhi office employee gets. For HR teams, this makes leave compliance a moving target, and getting it wrong brings legal penalties and employee disputes.
This guide covers the laws themselves: which statute governs each leave, the minimum entitlements state by state, what changed under the labour codes, and the penalties for non-compliance. For a simple list of leave types and how many days companies typically offer, see our separate guide on the different types of leave in India.
Key Takeaways
- Leave entitlements in India come mainly from the Factories Act, 1948 for factories and each state’s Shops and Establishments Act for offices and shops
- Earned leave accrues at 1 day per 20 days worked under the Factories Act, with eligibility after 240 days of work
- Maternity leave is the strongest central entitlement: 26 weeks paid under the Maternity Benefit Act, 1961
- State minimums differ sharply: Maharashtra gives 8 days casual leave with no separate sick leave, while Karnataka gives 12 days sick leave with no separate casual leave
- The four labour codes, in force since 21 November 2025, now carry these provisions forward, with existing rules applying during the transition
The Legal Framework Governing Leaves in India
The applicable leave law depends on two things: what your business does, and which state it operates in. HR teams must identify the governing law before drafting any leave policy.
The Factories Act, 1948
The Factories Act applies to manufacturing units employing ten or more workers with power, or twenty or more without power. Its leave rules are the baseline for factory workers across India:
- Earned leave accrues at 1 day for every 20 days of work performed in the previous calendar year
- A worker must complete at least 240 days of work in a year to become eligible
- Earned leave can be carried forward up to a maximum of 30 days
- States enforce the Act, so specific provisions can vary slightly by state
The Factories Act’s working condition and leave provisions now sit under the Occupational Safety, Health and Working Conditions Code, 2020, one of the four labour codes in force since November 2025. During the transition, the existing rules continue to operate.
The Shops and Establishments Acts (State Laws)
Offices, IT companies, retail stores, and all non-manufacturing businesses fall under their state’s Shops and Establishments Act. This is state legislation, so every state writes its own leave minimums, and a company operating in five states must comply with five different sets of rules. Maharashtra, for example, now follows the Maharashtra Shops and Establishments (Regulation of Employment and Conditions of Service) Act, 2017, which replaced its older law. The state-wise table below shows how sharply these minimums differ.
What each Leave Law Mandates
Every statutory leave traces back to a specific law. Here is the legal source and minimum for each.
Earned Leave (EL)/Privilege Leave (PL)
Earned leave is the most regulated leave type. Under the Factories Act, it accrues at 1 day per 20 days worked, after 240 days of work in the year. Under state S&E Acts, the rate and cap differ by state, with accumulation limits commonly between 30 and 45 days. Earned leave is also the only leave that can legally be encashed. The full rules, including carry-forward and encashment calculations, are in our guide on privilege leave.
Casual Leave (CL)
Casual leave has no single central law. It exists where a state’s S&E Act grants it: Maharashtra mandates 8 days per year, credited quarterly, lapsing if unused. Some states, like Karnataka, provide no separate casual leave at all. Details and application rules are in our guide on casual leave in India.
Sick Leave (SL)
Sick leave also comes from state law, not central law. Karnataka’s S&E Act grants 12 days of sick leave, Delhi and Tamil Nadu combine sickness and casual leave into one 12-day pool, and Maharashtra’s 2017 Act has no separate sick leave provision at all, with casual leave covering short absences. Employers commonly require a medical certificate beyond 2 to 3 consecutive days. A compliant sick leave policy should state your state’s exact position.
Maternity Leave
Maternity leave is the strongest central leave entitlement in India. It is governed by the Maternity Benefit Act, 1961, substantially strengthened by the 2017 Amendment.
- 26 weeks of fully paid leave for the first two children, and 12 weeks from the third child onwards
- A woman qualifies after working at least 80 days in the 12 months before her expected delivery
- The Act applies to establishments with 10 or more employees, and employers with 50 or more employees must provide a creche facility
- Adoptive mothers (child below 3 months) and commissioning mothers are entitled to 12 weeks of leave
- Dismissing a woman during maternity leave is a punishable offence, with imprisonment of three months to one year
- These provisions now continue under Chapter VI of the Code on Social Security, 2020
State-Wise Statutory Leave Entitlements
This is where compliance actually gets decided. The same employee role carries different legal minimums depending on the state. Here are four major states under their Shops and Establishments Acts:
| State (Act) | Earned Leave | Casual Leave | Sick Leave | EL Carry Forward Cap |
|---|---|---|---|---|
| Maharashtra (S&E Act, 2017) | 1 day per 20 days worked, after 240 days | 8 days, credited quarterly, lapses yearly | No separate provision | 45 days |
| Karnataka (S&E Act, 1961) | 1 day per 20 days worked (about 18 days) | No separate provision | 12 days | 30 days |
| Delhi (S&E Act, 1954) | 15 days after 12 months of service | 12 days (sickness and casual combined) | Combined with casual leave | 45 days |
| Tamil Nadu (S&E Act, 1947) | 12 days after 12 months of continuous service | 12 days (sickness and casual combined) | Combined with casual leave | 24 days [verify current cap] |
Three lessons from this table. First, never copy a leave policy from another state; Maharashtra’s missing sick leave and Karnataka’s missing casual leave trip up multi-state employers constantly. Second, combined pools (Delhi, Tamil Nadu) mean an employee cannot claim 12 sick days plus 12 casual days; it is one shared 12-day pool. Third, state amendments change these numbers, so confirm your state’s current rules and notification before finalising policy, and treat this table as the starting point, not the final word.
Other Laws That Grant Leave
Two more legal sources complete the picture, and most leave guides miss both.
ESI sickness benefit. For employees covered under the Employees’ State Insurance Act, 1948 (earning up to Rs. 21,000 per month), extended sickness absence is compensated by ESIC, not the employer. The scheme pays sickness benefit at about 70% of average daily wages for up to 91 days in a year, on medical certification. This is the actual law behind paid sickness protection for a large part of India’s workforce.
National and festival holidays. State laws also mandate paid holidays: typically 26 January, 1 May, 15 August, and 2 October, plus festival holidays that vary by state. Maharashtra’s 2017 Act, for example, grants 8 paid festival holidays, with double wages plus a substitute day off if the employee works on one. Plan these alongside leave in your annual holiday list.
Have Leave Laws Changed under the Labour Codes?
The four labour codes came into force on 21 November 2025 and reorganise where these leave provisions live. The Factories Act’s leave rules move under the Occupational Safety, Health and Working Conditions Code, 2020, which standardises earned leave at 1 day per 20 days worked and lowers eligibility from 240 to 180 days of work in a year. Maternity provisions move under the Code on Social Security, 2020 with the same entitlements. The core protections continue, and during the transition, while central and state rules are finalised, the existing rules and notifications continue to operate. HR teams should follow current state rules today and track their state’s code rules as they are notified, as part of their wider statutory compliance plan.
Leaves Not Mandated by any Law in India
A common compliance question is which leaves the law actually requires. These popular leaves have no central legal mandate:
- Paternity leave: no law requires it for private sector employees; government employees get 15 days under Central Civil Services Rules, and most companies voluntarily offer 3 to 7 days. See paternity leave in India
- Bereavement and marriage leave: purely company policy, commonly 3 to 5 days each
- Menstrual leave: no central law; Bihar grants government employees two days per month, Kerala has introduced it for university students, and some private companies offer menstrual leave voluntarily
- Compensatory off: mostly policy, but statutory in some states; Tamil Nadu and Karnataka require a substitute day off for work on holidays, often to be used within 90 days. See compensatory off
Offering these leaves is a retention choice, not a legal duty. The full list with typical day counts lives in our types of leave guide.
Leave Encashment and Carry Forward Rules
The financial side of leave is also law-governed, and errors here surface during payroll and Full and Final settlement.
Carry forward. Only earned leave can typically be carried forward, capped by the applicable law: 30 days under the Factories Act, 45 days under Maharashtra’s S&E Act, with other states in between. Casual and sick leave lapse at year end in most states.
Encashment. Encashment of accumulated earned leave is mandatory at Full and Final settlement, calculated on the last drawn basic salary. Encashment during service is a company policy choice, not a legal requirement. Track leave balances through the year so FnF figures are never disputed.
Tax treatment under the Income Tax law. Government employees get full exemption on retirement encashment under Section 10(10AA). Private sector employees get exemption up to Rs. 25 lakh at retirement or resignation, and anything above is taxed as salary. Encashment received during employment is fully taxable for everyone. Use the leave encashment calculator to compute exact amounts.
Penalties and Compliance Duties
Leave laws carry real teeth. Denying statutory leave, miscalculating earned leave, or failing to maintain leave registers invites penalties under the Factories Act and state S&E Acts, ranging from fines to prosecution for repeat violations. Maternity violations are the most serious: dismissing a woman during maternity leave carries imprisonment of three months to one year plus a fine. State inspectors can inspect leave registers and muster rolls, so every employer must maintain accurate, current leave records for each employee, apply the correct state’s rules to each work location, and reflect statutory minimums in the written leave policy. A company policy can always give more than the law, but never less.
How to Automate Leave Compliance with factoHR
Tracking different leave types, state-specific minimums, carry-forward caps, and encashment calculations manually is a compliance risk that grows with every hire and every new state. The factoHR leave management system applies the correct state’s rules automatically by work location, accrues and prorates leave from joining dates, enforces carry-forward and lapse rules at year end, computes FnF encashment on last drawn basic salary, and keeps every transaction audit-ready. Employees apply, check balances, and track approvals themselves through the time-off management platform, so HR stops reconciling spreadsheets and starts answering only the exceptions.
Frequently Asked Questions
What are the Main Statutory Leaves under Indian Law?
The main statutory leaves are earned leave, casual leave, and sick leave under the Factories Act and state Shops and Establishments Acts, plus maternity leave under the Maternity Benefit Act, 1961. Exact day counts depend on your state’s law, so employers must check the S&E Act of each state they operate in.
Is Sick Leave Mandatory by Law in India?
It depends on the state. Karnataka mandates 12 days of sick leave, Delhi and Tamil Nadu provide a combined sickness-and-casual pool of 12 days, and Maharashtra’s 2017 Act has no separate sick leave provision. ESI-covered employees additionally get sickness benefit from ESIC at about 70% of wages for up to 91 days a year.
Is Paternity Leave Mandatory by Law in India?
No. No central law mandates paternity leave for private sector employees. Government employees get 15 days under the Central Civil Services Rules. Most mid-size and large private companies offer 3 to 7 days voluntarily as policy, but an employer who offers none is not breaking any law.
Can an Employer Reject Earned Leave?
Yes. Approval is subject to business requirements and managerial discretion, and employers can defer requests during peak periods. What an employer cannot do is permanently deny the leave itself, stop its accrual, or refuse its encashment at Full and Final settlement.
What is the Maximum Maternity Leave under Indian Law?
26 weeks of fully paid leave for the first two children under the Maternity Benefit Act, 1961, as amended in 2017, of which up to 8 weeks can be taken before delivery. From the third child onwards it is 12 weeks, and adoptive and commissioning mothers get 12 weeks.
Have the Leave Laws Changed under the New Labour Codes?
The four labour codes came into force on 21 November 2025. Factory leave provisions now sit under the OSH Code, which keeps the 1-per-20-days accrual and lowers eligibility from 240 to 180 days, and maternity provisions sit under the Code on Social Security, 2020. During the transition, existing rules continue to operate.
Is Leave Encashment Taxable in India?
Yes, generally, as salary income. Government employees get full exemption on retirement encashment under Section 10(10AA). Private sector employees get exemption up to Rs. 25 lakh at retirement or resignation. Any encashment received while still employed is fully taxable for both sectors.
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