Leave Encashment Calculator
Estimate leave encashment (unused earned or privilege leave paid out in cash) from your average monthly Basic salary and Dearness Allowance and number of leave days. See an indicative split between exempt and taxable amounts under common Section 10(10AA) patterns for government employees, private-sector retirement or resignation, encashment during service, and death benefits.
For exit settlements, use the average of the last 10 months of Basic + DA where your policy follows income-tax wording. HRA and special allowances are usually excluded.
Your policy accrual (reference): 24 days/year. Actual encashable balance should match your payslip or leave ledger.
Per-day divisor (company rule)
Encashment is often (Basic + DA) ÷ divisor × days. Many employers use 30; others align with a 26-day payroll month—pick what matches your HR letter.
Employee type
When encashed
Tax treatment differs: payment during service is usually salary income; retirement or resignation may attract exemption limits for private staff; death benefits to a nominee are often fully exempt in many cases.
Policy reference (optional)
Tax rules refer to limits on earned leave linked to service. We highlight when your entered days exceed a simple thirty-days-per-service-year benchmark—your employer may apply a different cap.
Leave encashment (gross payout)
₹67,500
Indicative taxable
₹0
Indicative exemption
₹67,500
Per-day Basic+DA (÷30)
₹1,500
Indicative tax treatment split
Indicative exempt portion
₹67,500 • 100%
What is leave encashment?
Leave encashment is cash paid by an employer for accrued but unused eligible leave—commonly earned leave or privilege leave (EL/PL). It may be paid while you are still employed (if policy allows), at retirement or resignation, or to a nominee in case of death. The amount is usually based on Basic + DA, not on gross CTC, and is separate from gratuity or provident fund.
Leave encashment formula (India)
A widely used payroll formula is:
- Basic + DA — core wages; most employers exclude HRA, transport, and variable pay.
- 30 vs 26 — calendar month (30) or working-day month (26), per company policy.
- Unused days — balance approved for payout in your full and final or leave statement.
Tax exemption under Section 10(10AA) (overview)
The Income-tax Act treats leave salary differently depending on employer type and when the amount is received. In general, encashment during employment is taxed as salary. For Central and State Government employees, specified receipts at retirement may be fully exempt under one part of the section. For other employees, on retirement or similar termination, exemption is often the least of a statutory limit (currently ₹25 lakh), amount received, ten months' average salary (Basic + DA where applicable), and cash equivalent of unutilised earned leave subject to prescribed limits. Death-related payments to nominees are often outside tax in the employee's hands in many factual patterns.
Rules contain detailed definitions, caps on eligible leave (for example references to thirty days per year of service), and conditions for “non-Government” employees. Use this page for planning and education only—confirm final figures with your employer and a chartered accountant when filing returns.
Which leaves are usually encashable?
- Earned / privilege leave is most often encashable at exit or as per policy.
- Casual leave and sick leave may lapse or be non-encashable unless your contract says otherwise.
- Maternity and special leaves follow statute and company rules; they may not convert to cash.
Keywords and topics covered
This tool supports searches and learning around leave encashment calculator online, earned leave encashment, leave encashment on retirement, leave encashment income tax, 10(10AA) exemption, PL EL payout, and full and final settlement estimates for Indian employees.
Frequently asked questions
What is the formula for leave encashment in India?
Commonly: (Monthly Basic + Dearness Allowance) ÷ 30 or 26 × number of unused eligible leave days. The divisor and eligible leave types come from your employer's policy, not from gross salary.
Is leave encashment taxable?
Often yes for amounts received while still in service, as part of salary. At retirement or resignation, private-sector employees may get partial exemption within Section 10(10AA) and the current statutory limit. Government employees may have fully exempt treatment for qualifying retirement receipts under the same section. Always verify with a tax professional.
What is the maximum exemption for leave encashment?
For non-Government employees, law prescribes a monetary ceiling (currently ₹25 lakh) as one of the caps in the exemption calculation. The actual exempt amount is the least of several figures, not automatically ₹25 lakh.
Should I use 30 or 26 in the leave encashment calculation?
Use whatever your HR or payroll team specifies. Thirty is common for a calendar-day rate; twenty-six aligns with a working-day month in some payroll systems. The choice changes your per-day rate and total payout.
Can all unused leaves be encashed?
No. Only leave types and balances that your employment rules allow—often earned leave up to a maximum accumulation—can be encashed. Casual leave may lapse; sick leave rules vary.
Is leave encashment the same as gratuity?
No. Gratuity is a separate terminal benefit under the Payment of Gratuity Act (where applicable), computed on service and wages. Leave encashment pays only for unused leave days. Both may appear in a full-and-final statement.
How accurate is this calculator?
It applies standard payout arithmetic and a simplified view of common exemption patterns. Your employer may use different rounding, leave ledgers, or interpret statutory limits differently. Treat output as an estimate, not legal or filing advice.