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Most Indian leave policies are built on three types of leave: earned leave for planned time off, casual leave for short personal needs, and sick leave for illness. Each follows different rules.
Check before you rely on thisCheck the leave entitlements, carry forward and encashment rules in the Shops and Establishments Act and rules of each state you employ in, Factories Act 1948 Chapter VIII for factories, any labour code notifications, and the current Income-tax exemption limit on leave encashment.
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There is no single national leave code for all private employers. For shops, offices and commercial establishments, the state's Shops and Establishments Act sets minimum entitlements, and these vary by state. For factories, Chapter VIII of the Factories Act 1948 (s.79 onwards) governs annual leave with wages. Standing orders, appointment letters and the employer's own policy add to these minimums.
So the right number of days depends on where the employee works and what kind of establishment employs them. A policy can give more than the law requires, never less.
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| Factor | Earned leave (EL / PL) | Casual leave (CL) | Sick leave (SL) |
|---|---|---|---|
| Purpose | Planned time off, holidays, long breaks | Short, unplanned personal needs | Illness or medical treatment |
| How it is credited | Usually accrues with days worked | Usually credited at the start of the year or monthly | Usually credited at the start of the year or monthly |
| Notice | Applied for in advance | Short or same-day notice | Informed as soon as possible |
| Carry forward | Usually allowed, up to a limit | Usually lapses at year end | Depends on policy and state law; often limited |
| Encashment | Usually encashable, often at exit | Usually not encashable | Usually not encashable |
| Proof | Not normally needed | Not normally needed | Medical certificate often required beyond a set number of days |
| Legal minimum | Set by state law or the Factories Act | Set by state law where it provides for it | Set by state law where it provides for it |
Watch for itThese are common patterns, not rules. Some states require carry forward or encashment of particular leave types, and some merge casual and sick leave into one. Read the Act and rules that apply to each location.
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Separate buckets give clearer records and let you treat illness differently from personal time. They also invite people to call casual days sick days, or the reverse, when one bucket runs out.
Some employers merge casual and sick leave into a single pool, or move to one paid-time-off bucket on top of the statutory minimum. That is simpler to run, but you must still show that each statutory entitlement in each state is met, and the encashment and carry forward rules for each component still apply.
It depends on the law that covers the establishment. State Shops and Establishments Acts set their own minimums, and the Factories Act sets its own for factory workers. Check the Act and rules for each location.
Usually not; most policies let it lapse at year end. Some state laws treat leave differently, so confirm the rule for each state before writing the policy.
In most policies, yes. Earned leave, privilege leave and annual leave are names for the same accrued, plannable leave.
Encashment during service is taxed as salary. Encashment at retirement or exit can be partly exempt under the Income-tax Act, subject to limits that change, so check the current rule.
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