India's public holidays include gazetted and restricted days, as is the norm. The country’s holiday schedule is divided across three classifications: gazetted, restricted, as well as state and union territory. Commercial establishments should note the schedule for the respective states where they are located.
The number of leave days and holidays given by an organization to its employees should comply with the prescribed numbers under all applicable state laws.
Formally employed workers are entitled to privileged leave, sick and casual leaves besides other types of leaves as established by the company, such as marriage leave, private affairs leave, paternity leave, bereavement leave, exam leave, etc.
Privilege leave is the same as vacation / annual / earned / paid leave.
The Delhi Shops & Establishment Act provides for the following privilege leave:
- Employees who have worked for at least one year with the establishment are entitled to privilege leave for a period of 15 days;
- Employees who have completed four months of continuous employment are entitled to at least five days of privilege leave;
- Employees are permitted to accumulate privilege leave up to three times that permitted to be used in one year, meaning thereby that employees can accumulate up to 45 days; and
- Employees are also entitled to financial reimbursement in case they resign or are terminated from the establishment without having used the privilege leave.
Leave encashment policy: Treatment of outstanding leave
Privilege leaves are calculated differently for different states and are subject to encashment depending on the company policy.
In case an employee does not use all the privilege/earned leaves which were allowed to them, they may encash these outstanding leaves and earn a salary for the number of days that were allowed to be taken as leave but were not availed. The policy of leave encashment depends on the employer, and these policies may vary from employer to employer. Many organizations allow encashment of leave on one of the following:
- During the period of employment;
- At the time of retirement (including separation on account of resignation, retrenchment, etc.) of the employee; or
- At the termination of the employee.
Leave encashment during service is taxable in all cases as under section 89(1) of the Income Tax Act, 1961. Certain exemptions would be allowed for the amount received as leave encashment and the balance would be taxable as per the income tax slab rates. Leave encashment is received by the employee at the time of separation from the employer or retirement. The maximum leave encashment exemption limit is up to INR 25,00,000.
The system computes exemption based on the four factors which the minimum exemption amount considers. The following are the factors:
- Leave Encashment amount;
- Exemption limit;
- Average Monthly Salary X Number of months; and
- The salary includes basis pay, dearness allowance, and turnover basis commission. (Any other amount received is not to be included in the computation of salary.)
In case of non-government employees, the exemption is limited to the least of following:
- Cash equivalent of unutilized earned leave (earned leave entitlement cannot exceed 30 days for every year of actual service);
- Ten months’ average salary based on average salary of last 10 months immediately preceding the retirement; and
- Leave encashment received for delay, further subject to a limit of INR 300,000.
Leave salary paid to legal heirs of a deceased employee in respect of privilege leave standing to the credit of such employee at the time of death is not taxable.
Any payment by way of leave encashment received by central and State Government employees at the time of retirement in respect of the period of earned leave at credit is fully exempt.
Casual / sick leave
The nomenclature of casual and sick leaves may vary from state to state. For example:
The Delhi Shops & Establishment Act makes the following provision for casual and sick leave:
- Casual leave (the Delhi Act does not distinguish between casual and sick leave) for a total period of not less than 10 days in every year;
- Employees who have completed one month of continuous employment are entitled to not less than one day of casual leave for every month;
- Employees cannot accumulate unused casual leaves; and
- The Bombay Shops & Establishment Act does not provide for any casual or sick leave
Every woman is entitled to payment of maternity benefit at the rate of the average daily wage for the period of the employee’s actual absence from work. Apart from 12 weeks of salary, a female worker is entitled to a medical bonus of INR 3,500.
In the event of miscarriage or medical termination of pregnancy, the employee is entitled to six weeks of paid maternity leave.
Employees are also entitled to an additional month of paid leave in case of complications arising due to pregnancy, delivery, premature birth, miscarriage, medical termination, or a tubectomy operation (two weeks in this case).
No company shall compel its female employees to do tasks of a laborious nature that interfere with the pregnancy or the normal development of the fetus.
The public holiday schedule is divided across three classifications:
- Restricted; and
- State and union territory.
Companies doing business with state and government authorities, must note their respective holiday calendars. For example, in 2023, government offices in the National Capital Territory of Delhi reportedly have 18 Gazetted holidays and 32 days for restricted holiday (days for optional holiday).
Across India, there are three days designated as “national holidays” on which all establishments must provide a holiday to all employees, namely:
- Republic Day, January 26;
- Independence Day, August 15; and
- Gandhi Jayanti, October 2.
Irrespective of the law a company, industry, or organization follows, or whether they are public, private organizations or MNCs, every entity must necessarily remain closed on these days. Organizations that need to work on those days need to take prior approval from concerned authorities.
Gazetted holidays in India for 2023
January 26, Thursday: Republic Day
March 8, Wednesday: Holi
March 30, Thursday: Ram Navami
April 4, Tuesday: Mahavir Jayanti
April 7, Friday: Good Friday
April 22, Saturday: Id-ul-Fitr
May 5, Friday: Buddha Purnima
June 29, Thursday: Id-ul-Zuha
July 29, Saturday: Muharram
August 15, Tuesday: Independence Day
August 19, Friday: Janmashtami
September 7, Thursday: Janmashtami (Vaishnava)
September 28, Thursday: Birthday of Prophet Mohammad (Milad-un-Nabi or Id-e-Milad)
October 2, Monday: Mahatma Gandhi’s Birthday (Gandhi Jayanti)
October 24, Tuesday: Dussehra
November 12, Sunday: Diwali
November 27, Monday: Guru Nanak’s Birthday
December 25, Monday: Christmas Day
Non-Gazetted / restricted holidays in India for 2023
January 1, Sunday: New Year’s Day
January 14, Saturday: Makar Sankranti
January 15, Sunday: Pongal
February 5, Sunday: Hazrat Ali’s Birthday, Guru Ravidas’s Birthday
February 15, Wednesday: Swami Dayananda Saraswati Jayanti
February 18, Saturday: Maha Shivaratri
February 19, Sunday: Shivaji Jayanti
March 7, Tueday: Holika Dahan, Dolyatra
March 22, Wednesday: Chaitra Sukladi/Gudi Padava/Ugadi/Cheti Chand
April 9, Sunday: Easter Sunday
April 14, Friday: Vaisakhi/Vishu/Meshadi
April 15, Saturday: Vaisakhadi (Bengal)/ Bahag Bihu (Assam)
April 21, Friday: Jamat-Ul-Vida
May 9, Tuesday: Guru Rabindranath’s Birthday
June 20, Tuesday: Rath Yatra
August 16, Wednesday: Parsi New Year’s Day (Nauraj)
August 20, Sunday: Vinayaka Chaturthi
August 29, Tuesday: Onam or Thiru Onam Day
August 30, Wednesday: Raksha Bandhan
September 6, Wednesday: Janmashtami (Smarta)
September 19, Tuesday: Ganesh Chaturthi
October 21, Saturday: Dussehra – Saptami
October 22, Sunday: Dussehra – Maha Ashtami
October 23, Monday: Dussehra – Maha Navmi
October 28, Saturday: Maharishi Valmiki’s Birthday
November 1, Wednesday: Karva Chouth
November 12, Sunday: Naraka Chaturdasi
November 13, Monday: Govardhan Puja
November 15, Wednesday: Bhai Dhuj
November 19, Sunday: Chhat Puja
November 24, Friday: Guru Teg Bahadur’s Martyrdom
December 24, Sunday: Christmas Eve
State and union territory holidays
The list of state and union territory holidays is quite large. Please click here – https://www.india.gov.in/state-and-ut-holiday-calendar – to review local holidays that apply to your place of business.
In addition to office closures, governments in the state and union territories often observe “dry days” or days when the sale of alcohol is not permitted, on gazetted and state and union territory holidays. Dry days also routinely occur on local election dates.