Is Diwali a Compulsory Paid Holiday? India Labour Law Guide

As the festive season approaches, a familiar question echoes through offices, factories, and shops across India: “Is Diwali a compulsory paid holiday?” The answer in Indian labour law is not a simple yes or no. It is a multi-layered legal framework where the central government, state legislatures, and your employment contract all play a role.

The short answer is that no single central law in India mandates Diwali as a paid day off for all private-sector employees. While Section 25 of the Negotiable Instruments Act, 1881 governs public holidays for banks and government offices, private-sector entitlement to a paid Diwali holiday arises from three distinct legal pathways: your state’s specific labour legislation, the terms of your employment contract, or a long-standing customary workplace practice.

The Central Framework: Why Parliament Doesn’t Mandate Diwali

The four central Labour Codes that took effect on 21 November 2025, rationalising 29 erstwhile central labour statutes, are silent on specific festival holidays. While the Occupational Safety, Health and Working Conditions (OSHWC) Code, 2020 (which replaced the Factories Act, 1948) comprehensively regulates working hours, weekly rest days, overtime, and annual earned leave, it deliberately stops short of prescribing a national festival holiday calendar.

Under the Seventh Schedule of the Indian Constitution, labour falls under the Concurrent List (List III), empowering both Parliament and State Legislatures to enact laws. Because cultural and religious observances vary widely across regions, Parliament has historically left the regulation of national and festival holidays to individual state governments.

The Primary Legal Basis: Your State’s Law

States regulate private-sector festival holidays through two primary statutory mechanisms:

Dedicated “National and Festival Holidays” (NFH) Acts: States such as Karnataka, Tamil Nadu, Kerala, and Odisha have enacted standalone statutes that mandate a minimum number of paid national and festival holidays across factories, shops, and commercial establishments.
Shops and Establishments Acts: States such as Maharashtra embed paid festival holiday quotas directly within their Shops and Establishments legislation.

Under these state laws, employers must grant a fixed quota of paid holidays each calendar year. Crucially, these statutes rarely name Diwali as a non-negotiable, fixed holiday by default. Instead, statutes in states with festival quotas mandate 3 to 5 fixed days (such as Republic Day, Independence Day, Gandhi Jayanti, May Day, or State Formation Days) and require the remaining “festival holiday” quota to be selected from a state-recognized schedule in consultation with workers or the labour inspector. Diwali becomes a legally enforceable paid holiday once it is designated on the employer’s annual notified holiday list.

A Patchwork of State Rules

State	Applicable Statute	Legal Position on Diwali
Maharashtra	Maharashtra Shops and Establishments Act, 2017 (Section 18(7))	Mandates 8 paid holidays for establishments with 10 or more workers: 4 fixed days (26 Jan, 1 May, 15 Aug, 2 Oct) and 4 festival holidays agreed upon between the employer and workers before the start of the year. Diwali is enforceable once chosen among the four.
Karnataka	Karnataka Industrial Establishments (National & Festival Holidays) Act, 1963 (Section 3)	Mandates at least 10 paid holidays: 5 fixed days (26 Jan, 1 May, 15 Aug, 2 Oct, and 1 Nov for Kannada Rajyotsava) plus 5 festival holidays chosen in consultation with employees and submitted to the Labour Inspector.
Tamil Nadu	TN Industrial Establishments (National, Festival and Special Holidays) Act, 1958 (Section 3)	Mandates 9 paid holidays: 4 fixed days (26 Jan, 1 May, 15 Aug, 2 Oct) and 5 festival holidays specified by the Inspector in consultation with the employer and employees.
Delhi	Delhi Shops and Establishments Act, 1954 (Section 16)	Mandates exactly 3 paid National Holidays (26 Jan, 15 Aug, 2 Oct). Additional paid festival holidays (like Diwali) are not explicitly quotaed in the text of the Act; instead, offices grant them based on custom, employment contracts, or the annual GNCTD Gazetted Holiday notifications.

The Contractual and Customary Layer

Even where state law leaves festival selection flexible, an employer may be legally bound to grant a Diwali holiday through:

Company Policy or Employment Contract: Once an employer publishes its annual holiday calendar (or specifies paid holidays in an employment agreement or HR handbook) and includes Diwali, it becomes a binding contractual condition of service.
Customary Practice and Notice of Change: A holiday consistently granted over an extended period can crystallize into an implied condition of service through custom and usage. Under Section 40 of the Industrial Relations Code, 2020 (which replaced Section 9A of the erstwhile Industrial Disputes Act, 1947), an employer cannot unilaterally alter conditions of service specified in the Third Schedule (formerly the Fourth Schedule), including “leave with wages and holidays” and withdrawal of any customary concession or privilege, for “workers” without giving at least 21 days’ prior written notice. The Supreme Court of India (notably in Tata Iron and Steel Co. Ltd. v. The Workmen, 1972) has affirmed that altering established holiday practices affects conditions of service and requires statutory compliance.

What Happens If You Are Asked to Work on Diwali?

If Diwali is a declared holiday for your establishment (under the notified state list or company policy) and you are required to work, state laws mandate specific compensation:

Under State Shops and Establishments Acts: In states like Maharashtra (Section 18(7)), an employee required to work on a declared paid holiday is entitled to twice the ordinary rate of wages (200%), or normal wages for the day plus a paid compensatory holiday granted on another day.
Under State National and Festival Holidays Acts: In states like Karnataka and Tamil Nadu (Section 5 of their respective NFH Acts), an employer calling an employee to work on a notified festival holiday must generally give prior notice and provide either twice the wages (200%) or normal wages for that day plus a substituted paid holiday.

Actionable Takeaways

For Employees: Check the annual statutory holiday list displayed on your company notice board or HRMS portal (which employers are legally required to publish at the start of the calendar year), alongside your state’s Shops Act or NFH Act. If Diwali is on your company’s notified holiday list and you are asked to work, you are legally entitled to double pay or a paid compensatory off.
For Employers: Ensure your annual holiday calendar meets the exact statutory minimum for every state in which you operate, includes all fixed state holidays (such as 1 May in Maharashtra or 1 November in Karnataka), follows the consultation and notification filing process (such as Form I in Karnataka), and is published before 1 January each year.

Disclaimer: The information provided in this article is solely for general educational and informational purposes regarding Indian labour and employment laws and does not constitute formal legal advice or a legal opinion. Statutory holiday entitlements, overtime wages, and filing procedures vary significantly based on the specific state jurisdiction, nature of the establishment (industrial vs commercial), employee category, and periodic state government gazette notifications. Reading or relying on this content does not create a lawyer-client or consultant-client relationship. Employers, HR professionals, and employees are strongly advised to verify the latest state-specific rules and consult a qualified labour law practitioner before modifying workplace holiday policies or taking legal action.