diff --git a/app/models/carryover.rb b/app/models/carryover.rb
new file mode 100644
index 0000000000..e9caacd61d
--- /dev/null
+++ b/app/models/carryover.rb
@@ -0,0 +1,40 @@
+# frozen_string_literal: true
+
+# == Schema Information
+#
+# Table name: carryovers
+#
+#  id                  :bigint           not null, primary key
+#  discarded_at        :datetime
+#  duration            :integer
+#  from_year           :integer
+#  to_year             :integer
+#  total_leave_balance :integer
+#  created_at          :datetime         not null
+#  updated_at          :datetime         not null
+#  company_id          :bigint           not null
+#  leave_type_id       :bigint           not null
+#  user_id             :bigint           not null
+#
+# Indexes
+#
+#  index_carryovers_on_company_id     (company_id)
+#  index_carryovers_on_discarded_at   (discarded_at)
+#  index_carryovers_on_leave_type_id  (leave_type_id)
+#  index_carryovers_on_user_id        (user_id)
+#
+# Foreign Keys
+#
+#  fk_rails_...  (company_id => companies.id)
+#  fk_rails_...  (leave_type_id => leave_types.id)
+#  fk_rails_...  (user_id => users.id)
+#
+class Carryover < ApplicationRecord
+  include Discard::Model
+
+  belongs_to :user
+  belongs_to :company
+  belongs_to :leave_type
+
+  validates :from_year, :to_year, :total_leave_balance, :duration, presence: true
+end
diff --git a/app/models/company.rb b/app/models/company.rb
index b7a4cbc1db..a77cbeb576 100644
--- a/app/models/company.rb
+++ b/app/models/company.rb
@@ -44,6 +44,7 @@ class Company < ApplicationRecord
   has_many :timeoff_entries, through: :users
   has_many :holidays, dependent: :destroy
   has_many :holiday_infos, through: :holidays, dependent: :destroy
+  has_many :carryovers
 
   resourcify
 
diff --git a/app/models/leave_type.rb b/app/models/leave_type.rb
index f9a4178fe5..b44f8b7a79 100644
--- a/app/models/leave_type.rb
+++ b/app/models/leave_type.rb
@@ -70,6 +70,7 @@ class LeaveType < ApplicationRecord
   belongs_to :leave, class_name: "Leave"
 
   has_many :timeoff_entries, dependent: :destroy
+  has_many :carryovers
 
   validates :name, presence: true, format: { with: /\A[a-zA-Z\s]+\z/ }, length: { maximum: 20 }
   validates :color, presence: true, uniqueness: { scope: :leave_id, message: "has already been taken for this leave" }
diff --git a/app/models/user.rb b/app/models/user.rb
index 8ff3fe20e8..31291c2b68 100644
--- a/app/models/user.rb
+++ b/app/models/user.rb
@@ -72,6 +72,7 @@ def initialize(msg = "Spam User Login")
   has_many :clients, through: :projects
   has_many :client_members, dependent: :destroy
   has_many :timeoff_entries, dependent: :destroy
+  has_many :carryovers
 
   rolify strict: true
 
diff --git a/app/services/timeoff_entries/index_service.rb b/app/services/timeoff_entries/index_service.rb
index 851d50bc92..5685adc0f5 100644
--- a/app/services/timeoff_entries/index_service.rb
+++ b/app/services/timeoff_entries/index_service.rb
@@ -176,15 +176,15 @@ def user_joined_date
       def calculate_previous_year_carryforward(leave_type)
         return 0 unless leave_type
 
-        total_leave_type_days = calculate_total_duration(leave_type, previous_year)
-
-        timeoff_entries_duration = leave_type.timeoff_entries.kept.where(user_id:).sum(:duration)
-
-        net_duration = (total_leave_type_days * 8 * 60) - timeoff_entries_duration
-
-        carry_forward_duration = leave_type.carry_forward_days * 8 * 60
-
-        net_duration > carry_forward_duration ? carry_forward_duration : net_duration > 0 ? net_duration : 0
+        last_year_carryover =
+          Carryover.find_by(
+            user_id:,
+            company_id: current_company.id,
+            leave_type_id: leave_type.id,
+            from_year: previous_year
+          )
+
+        last_year_carryover && (last_year_carryover.duration > 0) ? last_year_carryover.duration : 0
       end
   end
 end
diff --git a/db/migrate/20240429142938_create_carryovers.rb b/db/migrate/20240429142938_create_carryovers.rb
new file mode 100644
index 0000000000..18f0342ca5
--- /dev/null
+++ b/db/migrate/20240429142938_create_carryovers.rb
@@ -0,0 +1,19 @@
+# frozen_string_literal: true
+
+class CreateCarryovers < ActiveRecord::Migration[7.1]
+  def change
+    create_table :carryovers do |t|
+      t.references :user, null: false, foreign_key: true
+      t.references :company, null: false, foreign_key: true
+      t.references :leave_type, null: false, foreign_key: true
+      t.integer :from_year
+      t.integer :to_year
+      t.integer :total_leave_balance
+      t.integer :duration
+      t.datetime :discarded_at
+
+      t.timestamps
+    end
+    add_index :carryovers, :discarded_at
+  end
+end
diff --git a/db/schema.rb b/db/schema.rb
index 813770e521..66a85e37c2 100644
--- a/db/schema.rb
+++ b/db/schema.rb
@@ -10,7 +10,7 @@
 #
 # It's strongly recommended that you check this file into your version control system.
 
-ActiveRecord::Schema[7.1].define(version: 2024_04_11_174949) do
+ActiveRecord::Schema[7.1].define(version: 2024_04_29_142938) do
   # These are extensions that must be enabled in order to support this database
   enable_extension "plpgsql"
 
@@ -100,6 +100,23 @@
     t.index ["visit_token"], name: "index_ahoy_visits_on_visit_token", unique: true
   end
 
+  create_table "carryovers", force: :cascade do |t|
+    t.bigint "user_id", null: false
+    t.bigint "company_id", null: false
+    t.bigint "leave_type_id", null: false
+    t.integer "from_year"
+    t.integer "to_year"
+    t.integer "total_leave_balance"
+    t.integer "duration"
+    t.datetime "discarded_at"
+    t.datetime "created_at", null: false
+    t.datetime "updated_at", null: false
+    t.index ["company_id"], name: "index_carryovers_on_company_id"
+    t.index ["discarded_at"], name: "index_carryovers_on_discarded_at"
+    t.index ["leave_type_id"], name: "index_carryovers_on_leave_type_id"
+    t.index ["user_id"], name: "index_carryovers_on_user_id"
+  end
+
   create_table "client_members", force: :cascade do |t|
     t.bigint "client_id", null: false
     t.bigint "user_id", null: false
@@ -532,6 +549,9 @@
 
   add_foreign_key "active_storage_attachments", "active_storage_blobs", column: "blob_id"
   add_foreign_key "active_storage_variant_records", "active_storage_blobs", column: "blob_id"
+  add_foreign_key "carryovers", "companies"
+  add_foreign_key "carryovers", "leave_types"
+  add_foreign_key "carryovers", "users"
   add_foreign_key "client_members", "clients"
   add_foreign_key "client_members", "companies"
   add_foreign_key "client_members", "users"
diff --git a/spec/factories/carryovers.rb b/spec/factories/carryovers.rb
new file mode 100644
index 0000000000..fa1ec861ca
--- /dev/null
+++ b/spec/factories/carryovers.rb
@@ -0,0 +1,14 @@
+# frozen_string_literal: true
+
+FactoryBot.define do
+  factory :carryover do
+    user
+    company
+    leave_type
+    from_year { 2023 }
+    to_year { 2024 }
+    total_leave_balance { 10000 } # in minutes
+    duration { 2400 } # in minutes
+    discarded_at { "2024-04-29 19:59:39" }
+  end
+end
diff --git a/spec/models/carryover_spec.rb b/spec/models/carryover_spec.rb
new file mode 100644
index 0000000000..eb2fd6115c
--- /dev/null
+++ b/spec/models/carryover_spec.rb
@@ -0,0 +1,20 @@
+# frozen_string_literal: true
+
+require "rails_helper"
+
+RSpec.describe Carryover, type: :model do
+  subject { build(:carryover) }
+
+  describe "Associations" do
+    it { is_expected.to belong_to(:user) }
+    it { is_expected.to belong_to(:company) }
+    it { is_expected.to belong_to(:leave_type) }
+  end
+
+  describe "Validations" do
+    it { is_expected.to validate_presence_of(:from_year) }
+    it { is_expected.to validate_presence_of(:to_year) }
+    it { is_expected.to validate_presence_of(:total_leave_balance) }
+    it { is_expected.to validate_presence_of(:duration) }
+  end
+end