When one thinks of holy water, what comes to mind is water that has been blessed by a priest in a church. This water is then used for baptism, blessing others, healing, and exorcising demons. So why would a witch need holy water? Contrary to popular belief, Christians do not have a monopoly on holy water. Witches use it to bless their tools and altars, cast circles, bath, and other things. Some witches and Pagans avoid the term holy water because it's associated with the church.
How does one make Pagan holy water? Since all Pagans are priestesses or priests, they can bless the water themselves. Several different ways are documented online. Just pick one and go from there. I like using incorporating all elements into creating sacred water.
Sacred (Holy) Water
-water (filtered from tap, collected from a stream, rainwater, etc.)
Mix a pinch or two of sea salt (earth) in the water (water). Pass your favorite burning incense (fire / air) over the uncovered bottle water. Say (air / spirit) your blessing of choice either in or out of a formal ritual. If possible set covered bottle outside during the night of the full moon (spirit). To harness extra power in your sacred water, set outside during a lunar eclipse.