India Overtime Regulations: What Employers and Employees Must Know

Overtime regulations in India are foundational to the country’s labor law regime, serving to protect workers’ rights and promote fair workplace practices. Both employers and employees must understand these provisions to ensure legal compliance and a healthy work environment.

Key laws governing overtime in India

In most industries, there is a ceiling on the amount of overtime that can be performed, generally set at 50 hours within a quarter, although this limit can differ based on specific state regulations or the nature of the industry. Overtime is primarily regulated through the following statutes:

• Factories Act, 1948: Workers in factories may not be required or permitted to work more than nine hours a day or 48 hours a week. Overtime work—hours in excess of these limits—must be compensated at double the employee’s standard wage rate.

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• Shops and Establishments Acts: These are state-specific laws governing working conditions in shops, offices, and commercial establishments. While regulations vary by state, employees generally should not work more than eight to nine hours per day or 48 hours per week. Overtime is usually paid at twice the normal rate.
• Minimum Wages Act, 1948: This act ensures that for any work beyond the prescribed working day, overtime is paid at the higher end of the wage scale fixed under the Minimum Wages Act or under any applicable law.

ALSO READ: A Guide to Minimum Wage in India in 2025

Legal variations in overtime regulations across Indian states

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India’s approach to overtime regulation is characterized by significant variation at the state level, with several jurisdictions actively reforming or liberalizing their frameworks to align with evolving economic priorities and sector-specific needs. While central statutes provide the basic foundation, states retain the authority to set more flexible—or restrictive—overtime conditions, leading to a diverse national landscape.

India’s southern states, including Telangana, Tamil Nadu, and Andhra Pradesh, have recently overhauled their overtime policies or granted sector-specific exemptions to better accommodate modern work environments and global business demands.

Source: Working Hours in India, Simpliance.

State-level overtime reforms

In July 2025, Telangana implemented amendments to its Shops and Establishments Act, 1988 for commercial establishments (excluding retail shops), permitting a 10-hour workday while maintaining the weekly cap at 48 hours. Overtime compensation is now payable only for work beyond 48 hours per week, not for daily excess beyond eight hours, with a quarterly cap of 144 overtime hours. 

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Tamil Nadu’s legislative reform in April 2023 similarly aimed to introduce flexibility, particularly for export-focused sectors like electronics manufacturing. The state now allows select factories to operate on an optional four-day workweek, with shifts of up to 12 hours—again, not exceeding 48 hours per week—provided there is explicit worker consent.

Andhra Pradesh extended its overtime exemption for IT and ITeS firms in March 2025, preserving standard weekly limits (48 hours) but enabling 24×7 operations with provisions for digital recordkeeping and night shifts for women, contingent on employer-provided safety and transport.

Frequently asked questions (FAQs) on overtime payment and legal requirements

Q1: How is overtime pay calculated for employees in India?

Overtime pay in India is generally calculated based on an employee’s basic salary, along with certain allowances such as dearness allowance (DA) and, where applicable, risk allowance (RA). Bonuses and incentives are typically excluded from overtime calculations under Indian labor laws. The overtime rate is most often set at twice the standard hourly rate and does not take into account the full gross salary.

Q2: What is the formula for calculating overtime pay for salaried employees?

For salaried employees, the hourly overtime pay is calculated as:

2 × [(monthly basic pay+DA+RA) ÷ (total days in month×maximum working hours per day)]× number of overtime hours. 

Here, “total days in month” usually ranges from 26 to 30, while “maximum working hours” is typically eight to nine hours per day. Only the fixed components (basic pay, DA, and RA) are included in this calculation.

Q3: How do you calculate overtime for hourly wage employees?

For employees who are paid by the hour, the overtime pay formula is:

(Basic pay ÷ total days in month × maximum daily hours) × 2 × overtime hours worked.

This ensures overtime hours are compensated at twice the regular hourly rate.

Q4: Can you provide an example of overtime calculation?

Suppose a salaried employee earns INR 600,000 per annum, receives a monthly DA of INR 5,000 and RA of INR 2,000, works 30 days in the month with a standard eight-hour workday, and puts in five overtime hours.

• Monthly basic pay = INR 600,000 ÷ 12 = INR 50,000
• Hourly overtime pay = 2 × [(INR 50,000 + INR 5,000 + INR 2,000) ÷ (30 × 8)] × 5
• Which results in: 2 × (INR 57,000 ÷ 240) × 5 = 2 × 237.5 × 5 = INR 2,375

Thus, for five overtime hours, the employee is paid an additional INR 2,375.

Q5: What factors affect overtime pay policies in India?

Key factors for the overtime pay policy in India are as follows:

• The specific laws that apply to the business (such as the Factories Act, Shops and Establishments Act, or sector-specific regulations).
• The distinction between salaried (exempt) and hourly (non-exempt) workers, as misclassification can result in compliance issues.
• State-specific regulations, since each state may have different overtime thresholds and calculation methods.
• Whether bonuses, shift differentials, and other allowances are considered in regular hourly rate calculations which can affect the ultimate overtime payout.

Q6: What are some common mistakes to avoid with overtime pay regulations?

Employers should ensure they do not do the following:

• Refuse overtime payment if prior approval wasn’t obtained by employees.
• Underestimate total working hours by excluding nonproductive activities (like training or travel time).
• Neglect state-specific overtime laws.
• Allow employees to work “off the clock” without official time tracking.
• Miscalculate the overtime rate by failing to include all legally required earnings components.

Q7: How can overtime hours be tracked accurately?

Adopting automated attendance and time-tracking systems reduces manual errors and administrative workload, ensuring precise capture of working and overtime hours. Such systems can integrate with payroll, making it easier to comply with complex overtime rules and guaranteeing proper remuneration to employees.

Q8: Are there differences in overtime calculation between Indian states or industries?

Yes. While the standard principle is paying overtime at twice the regular hourly rate, regulations can differ based on state laws and industry. Some states have stricter daily, weekly, or quarterly caps, and there may be additional conditions for certain industries or roles. It is crucial for employers to be familiar with the rules applicable in their region and business sector to ensure compliance.

Conclusion

India’s overtime regulations for private companies are increasingly state-driven and sector-sensitive, so that businesses must adopt a location-specific compliance strategy. The evolving legal environment offers greater operational flexibility. By staying ahead of these changes, companies can avoid regulatory penalties, optimize workforce planning, and build a reputation as law-abiding, employee-friendly employers in India’s dynamic labor market.

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