Earned Leave (EL / PL)

What is Earned Leave (EL / PL)?

Earned Leave, also called Privilege Leave (PL) or Annual Leave (AL), is the main pool of paid time off in Indian companies. It accrues monthly, usually 1.25 to 1.75 days per month, working out to 15-21 days a year. Most employers let staff carry forward unused EL up to a cap (often 30-60 days), and the balance gets paid out at full-and-final settlement when you resign or retire. Eligibility and accrual rules come from the Shops & Establishment Act of each state, so the exact entitlement varies. EL usually needs prior approval and is meant for planned breaks, vacations, or personal work. Some companies block EL during probation or release it only after confirmation.

Formula: Monthly accrual = Annual EL entitlement / 12 (e.g., 18 days a year = 1.5 days a month)

Example

Priya gets 18 EL a year. By June (6 months), she has accrued 9 days. She takes a 7-day Goa trip and her balance drops to 2 days, with more accruing each following month.

How Earned Leave (EL / PL) is used

HR uses EL balances for vacation planning, year-end carry-forward calculations, and exit settlement payouts. Employees apply for EL through the leave portal with prior approval.

Earned Leave (EL / PL) FAQs

Can earned leave be carried forward to next year?

Yes, most companies allow carry-forward up to a cap (commonly 30-45 days). Anything above the cap either lapses or is auto-encashed at year-end, depending on policy.

Is earned leave encashment taxable?

During service, EL encashment is fully taxable. At retirement or resignation, non-government employees get an exemption up to ₹25 lakh (lifetime) under Section 10(10AA).

How is EL different from CL?

EL accrues over time, can be carried forward, and is encashable. CL is a fixed yearly bucket for short personal breaks, lapses at year-end, and usually isn't encashable.