You have not mentioned whether you have your own leave policy. If not, you are to be governed by the statutory provisions of the Acts applicable to your establishment. There are two main Acts that provide for annual/earned leave. One is the Factories Act, 1948, and the other is the Shops and Establishments Act of your state. The issue is to be approached as under.
1) If your establishment indulges in the manufacturing process and is covered by the Factories Act (employing ten with power or twenty without power), you need to follow the Factories Act. If so, sec. 79 of the Act excludes holidays or off days falling during the leave period.
2) If your establishment is covered by the Shops Act, then you have to refer to the relevant provision in your state Act as it may differ from state to state. For example, the Bombay Shops and Establishments Act include weekly offs falling during the leave period of the employee as part of the leave.
Hope this will clarify your doubt.
Regards,
B. Saikumar
HR & Labour Law Consultant
Chipinbiz Consultancy Pvt. Ltd
Mumbai
Tel: [Phone Number Removed For Privacy Reasons]