Leave Encashment Issue - please provide any ACT or Rule as per shops and Establishment

Dear Team Members, In my company, there is a policy of Leave Encashment for 30 days a year. But if any employee is absent for any day in a month except weekly off and festival holiday, then the company deduct the salary for the day, and the same is compensated through leave encashment by giving only basic pay at the end of the year. But his Appointment Letter clearly stated that he will enjoy the annual leave as per company policy. As an HR personnel, when I described the situation to my director that CTC computes with statutory benefits and at the time of encashment, we are giving only basic pay at that time he did not agree with me. Could you please provide any ACT or Rule as per shops and Establishment so that I may able to implement the leave policy apart from CTC in my company. CTC Computation are given below for your kind perusal.

COMPUTATION PERCENTAGE P.M. P.A.
Basic Per month 10000 120000
HRA Per month 1500 18000
Conv. Allow. Per month 1500 18000
Total GROSS Per month 13000 156000
LESS
Employees EPF 12% 1200 14400
ESIC 0.75% 98 1170
P. Tax AS PER SLAB 110 1320
Employees Net Take Home 11593 139110

EMPLOYER CONTRIBUTION Per month
PF % 12.00 1200 14400
ESI % 3.25 325 3900
BONUS % 12.50% 1250 15000
LEAVE ENCASHMENT 8.33% 833 9996
TOTAL 3608 43296
CTC P.M. & P.A. 16608 199296

First of all, not permitting an employee to take leave or deducting salary when he is on authorised leave, is bad in law. The law has provided certain employee benefits, and these are for the employees to avial. Leave is one among them. No Act has any provision regarding encashment of leave during the service, but all the Acts say that unavailed leave shall be encashed at the time of discharge, at the time of leaving the service only. Therefore, the basic objective of granting leave has been defeated in your company. Secondly, at the time of encashment, the salary should include the total salary and not the basic alone. Nowhere in the law it is said that only basic wages will qualify for encashment of leaves.

But 30 days' leave a year is too much and beyond what is provided under the law. The law governing the leaves in a shop/ commercial establishment being state subject, you have to refer to your state Act and find what is the total leaves that is permitted to an employee, and which all types of leave can be surrendered. Anyway, no state law has a provision of 30 leaves in a year and that all the 30 leaves can be surrendered or encashed.