Earned leave (EL), also called privilege leave (PL), is India’s statutory annual leave—paid time off that accrues based on days worked, rather than being granted as a lump sum at the start of the year. The two names mean the same thing; “privilege leave” is the older term, still common in policies and payslips.

For anyone used to a single PTO pool, the name isn’t the point. Earned leave is one bucket among several, and the only one that behaves like vacation.

Where it sits among India’s leave types

Indian employers typically run three or four separate entitlements in parallel:

• Earned / privilege leave — the vacation entitlement. Accrues with service, carries forward, can be encashed
• Casual leave (CL) — short-notice personal absence, usually a day or two. Doesn’t carry forward, isn’t encashable
• Sick leave (SL) — illness, often needing a certificate beyond two or three days. Generally doesn’t carry forward
• Compensatory off — granted against extra hours or work on a holiday

These aren’t interchangeable, and most policies bar combining casual leave with earned or sick leave in one stretch.

The consequence for a global leave type structure: you can’t map India to one annual leave balance. Collapse EL, CL and SL into a single pool and you lose the distinctions that govern carry-forward, encashment and termination payout — only EL carries all three.

Check out all leave laws of India.

How much, and who qualifies

Entitlement comes from two directions. Factories are governed by the Factories Act 1948; offices, shops and most service businesses fall under the Shops and Commercial Establishments Act of the relevant state — and those acts differ, which is why there’s no single national number.

The mechanism is an accrual formula rather than a flat annual grant. Under the Occupational Safety, Health and Working Conditions Code, 2020, a worker earns one day of leave for every twenty days worked (one per fifteen for adolescent workers) — roughly fifteen days across a full year, with state rules and company policy often setting more. Many employers accrue 1.25 days a month, reaching the same place more smoothly.

Eligibility carries a threshold, and it recently moved: a worker must have worked 180 days or more in the calendar year, down from the long-standing 240.

The law changed in 2025 — and is still settling

This is the part worth getting right, because most reference material predates it.

India’s four Labour Codes took effect on 21 November 2025, consolidating dozens of older statutes. For leave, the OSH Code sets the position above: 180-day eligibility, one-in-twenty accrual, carry-forward capped at 30 days, and an entitlement to encash the excess.

But the Codes operate through rules, and labour is a concurrent subject — centre and states both legislate. Central rules were notified in May 2026, with states notifying their own through 2026 and the government targeting completion by the end of October. Until a state’s rules are in place, its existing law continues to apply.

The framework is settled; the local detail isn’t, uniformly. Check the position in the states where you actually have people.

Encashment

Unused earned leave converts to cash, and under the Code this is a right rather than a discretionary benefit: a worker may request encashment at the end of the calendar year, and leave accrued beyond thirty days is encashable.

The tax treatment matters for budgeting. Under section 10(10AA) of the Income-tax Act, encashment received by non-government employees on retirement or resignation is exempt only up to ₹25 lakh (2.5 million rupees) — raised from ₹3 lakh with effect from 1 April 2023, as a lifetime cap across employers. Encashment taken while still employed is generally taxable as salary.

Running it in a global policy

• Keep EL, CL and SL as distinct types, even if your other countries use one pool
• Accrue monthly and show the balance — an accrual employees can’t see is one they’ll dispute
• Apply the carry-forward cap at year end rather than letting balances drift
• Track the 180-day threshold for joiners and leavers, since a partial year may not qualify
• Treat state variation as real: a Mumbai office and a Bengaluru office can sit under different rules

Frequently asked questions

Is earned leave the same as privilege leave? Yes — “privilege leave” is simply the older term for the same entitlement.

How many days of earned leave do employees get in India? There’s no single national figure. The statutory accrual is one day per twenty days worked — roughly fifteen a year — with state law and company policy frequently granting more.

Can earned leave be carried forward? Yes, capped at thirty days under the OSH Code, with the excess encashable. Leave applied for and refused carries forward without that limit.

Is leave encashment taxable in India? During employment, yes, as salary. On retirement or resignation, non-government employees are exempt up to a lifetime ₹25 lakh.

This entry is general information, not legal advice. Indian leave entitlements vary by state and by establishment type, and rules under the Labour Codes are still being notified — verify locally before applying them.