About the Leave Encashment Calculator
This leave encashment calculator works out how much you receive for unused earned leave and how much of it is exempt from income tax in India. The encashment amount is your leave balance multiplied by your daily salary — basic pay plus dearness allowance divided by 30 (or 26, if your employer uses working days).
For non-government employees encashing leave on retirement or resignation, the exemption under section 10(10AA)(ii) of the Income-tax Act, 1961 is the lowest of four amounts: the encashment actually received; ₹25,00,000 (the limit notified by CBDT from 1 April 2023, reduced by any exemption claimed earlier); 10 months’ average salary; and the cash value of your leave balance, counting no more than 30 days of leave for each completed year of service, at average salary. Central and state government employees get a full exemption on retirement, and leave encashed while still in service is fully taxable.
Enter your last basic + DA, leave balance, average salary over the last 10 months, years of service, leave credited each year and leave availed during service. The calculator shows the encashment amount, each of the four limits, the exempt and taxable parts. From tax year 2026-27 the Income-tax Act, 2025 replaces the 1961 Act, so check that the same limits apply to your year.
With the default inputs, the tax-exempt leave encashment is ₹464,000.00. Change any value above to recalculate instantly.
How to use the leave encashment calculator
- 1Choose whether leave is encashed on leaving or while in service, and your employer type.
- 2Enter your last basic + DA and your leave balance.
- 3For non-government retirement, enter average salary, years of service, leave credited each year and leave already availed.
- 4Add any leave encashment exemption claimed with an earlier employer.
- 5Read the encashment amount, each limit and the exempt and taxable parts.
Formula and method
The encashment amount is the number of earned leave days to your credit multiplied by one day’s salary, taken as monthly basic pay plus dearness allowance divided by 30 (some employers divide by 26). Salary for the exemption means basic pay, dearness allowance that forms part of retirement benefits and any turnover-based commission, averaged over the 10 months immediately before retirement or resignation.
Eligible leave for the fourth limit is your leave balance, but no more than 30 days for every completed year of service minus leave already availed or encashed, valued at average salary per day. The exempt amount is the lowest of the four limits; the rest is taxable as salary. The ₹25 lakh ceiling is a lifetime limit across employers. Government employees retiring get a full exemption, and encashment during service is fully taxable.
- Average salary
- Average basic + DA (and turnover commission) over the last 10 months
- ₹25,00,000
- Limit notified by CBDT (Notification 31/2023) from 1 April 2023
Worked examples
Private employee retiring after 25 years
240 days × ₹60,000 ÷ 30 = ₹4,80,000 received. Eligible leave is the lower of 240 days and 25 × 30 − 400 = 350 days, so 240 days at the ₹58,000 average = ₹4,64,000, which is the lowest limit. ₹4,64,000 is exempt and ₹16,000 is taxable.
Senior executive with a large balance
Encashment is 300 × ₹2,00,000 ÷ 30 = ₹20,00,000. Ten months’ average salary and the value of 300 eligible days are both ₹19,00,000, below the ₹25 lakh ceiling, so ₹19,00,000 is exempt and ₹1,00,000 taxable.
Only 15 days credited a year
With 15 days a year for 10 years and 50 days availed, 100 days are eligible — the whole balance. Encashment of 100 × ₹45,000 ÷ 30 = ₹1,50,000 is below every limit, so it is fully exempt.
Encashed while still in service
Encashing 30 days during employment pays 30 × ₹60,000 ÷ 30 = ₹60,000, all of which is taxable salary.
Frequently asked questions
How is leave encashment calculated?+
Multiply your earned leave balance by one day’s salary. One day’s salary is usually (basic + DA) ÷ 30, though some employers divide by 26 working days. Check your leave policy for the exact divisor.
Is leave encashment taxable?+
Leave encashed during service is fully taxable. On retirement or resignation, government employees are fully exempt, and other employees are exempt up to the lowest of four limits under section 10(10AA), including the ₹25 lakh cap.
What is the leave encashment exemption limit?+
For non-government employees the overall limit is ₹25,00,000, raised from ₹3,00,000 by CBDT Notification 31/2023 with effect from 1 April 2023. It is a lifetime limit across all employers.
Is leave encashment on resignation tax-free?+
Yes, section 10(10AA) covers retirement on superannuation or otherwise, which includes resignation. The same four limits apply, so part of the payment may still be taxable.
Can I claim relief if leave encashment raises my tax?+
If arrears or leave encashment push your income into a higher slab, you may claim relief under section 89 by filing Form 10E before filing your return.
Tax results are estimates based on published rules and simplified assumptions. They are not tax advice — check official guidance or a tax professional for your situation.