Leave Encashment Calculator
Cash value of unused leave and the Section 10(10AA) exemption.
Exemption working
| Item | Amount |
|---|---|
| Per-day salary (basic + DA ÷ 30) | ₹2,000 |
| Gross encashment (60 days) | ₹1,20,000 |
| Limit: 10 months' salary | ₹6,00,000 |
| Limit: ₹25,00,000 lifetime cap left | ₹25,00,000 |
| Exempt amount | ₹1,20,000 |
| Taxable amount | ₹0 |
Leave encashment is the money your employer pays for earned leave you never took. This calculator converts your unused leave days into rupees using your monthly basic plus dearness allowance, then applies the Section 10(10AA) exemption to show how much of that payout is tax-free and how much is taxable.
The tax treatment depends on three things: whether you are a government employee, whether the leave is encashed while in service or on retirement or resignation, and how much of the ₹25 lakh lifetime exemption you have already used at earlier employers. Switch those settings above and the split updates instantly.
How is leave encashment calculated?
The payout itself is simple: Per-day salary = Monthly (basic + DA) ÷ 30, and Gross encashment = Per-day salary × Leave days encashed. The exemption for non-government employees under Section 10(10AA)(ii) is the least of four amounts — the actual encashment, ₹25,00,000 less any exemption claimed earlier in your career, ten months' average salary, and the cash value of 30 days' leave for each completed year of service.
Worked example: with a monthly basic plus DA of ₹60,000, the per-day salary is 60,000 ÷ 30 = ₹2,000. Encashing 400 days of accumulated leave at retirement gives a gross payout of 2,000 × 400 = ₹8,00,000. Ten months' salary is ₹6,00,000, which is the lowest limit here, so ₹6,00,000 is exempt and the remaining ₹2,00,000 is added to your salary income and taxed at your slab rate.
How to use this calculator
- Enter your monthly basic salary plus dearness allowance — HRA, bonus and other allowances do not count for this calculation.
- Set the number of unused leave days your employer is paying for.
- Choose whether the encashment is happening at retirement or resignation, or while you are still in service.
- Select Government if you work for the Central or a State government; every other employer counts as Private.
- If you claimed a leave encashment exemption at an earlier job, enter that amount so the ₹25 lakh lifetime cap is applied correctly.
Leave encashment rules in India
Central and State government employees get a full exemption on leave encashment received at retirement — no limits apply. For everyone else the lifetime cap was raised from ₹3,00,000 to ₹25,00,000 with effect from 1 April 2023, a long-overdue change given how much salaries have risen since the old ceiling was set. The cap is a lifetime one across all employers, so an exemption used at a previous job reduces what is left for the next.
Encashment taken while you are still working is fully taxable regardless of employer type, which is why most people hold their earned leave until they exit. If the encashment is paid to a legal heir after the employee's death it is entirely exempt. Employers also deduct TDS on the taxable portion, so check Form 16 and your Form 26AS after a big payout to confirm the exempt amount was reported correctly.
Frequently asked questions
Is leave encashment taxable in India?
It depends on when and where it is paid. Government employees pay no tax on leave encashment at retirement; private-sector employees get an exemption limited to the least of four figures under Section 10(10AA)(ii), and any excess is taxable. Encashment received while still in service is fully taxable for everyone.
What is the ₹25 lakh leave encashment exemption limit?
It is the lifetime ceiling on tax-free leave encashment for non-government employees, raised from ₹3 lakh with effect from April 2023. The limit applies across your whole career, so if you claimed ₹5 lakh at an earlier employer only ₹20 lakh remains available at the next one.
How is the per-day salary for leave encashment worked out?
Divide your last drawn monthly basic salary plus dearness allowance by 30. Allowances such as HRA, conveyance and special allowance are excluded, which is why the encashment figure is usually much smaller than your monthly gross would suggest.
Is leave encashment on resignation treated the same as on retirement?
Yes. Section 10(10AA)(ii) covers encashment received on retirement 'whether on superannuation or otherwise', and the Income Tax Department applies the same exemption test when you resign. The four-limit calculation and the ₹25 lakh lifetime cap work identically in both cases.
Does my employer deduct TDS on leave encashment?
Yes, on the taxable portion only. The employer adds the taxable part to your salary income for the year and deducts TDS under Section 192, reporting the exempt amount separately in Form 16. Verify both figures before filing your return.
Can I claim leave encashment exemption twice?
You can claim it more than once, but never beyond the ₹25 lakh lifetime total. Each claim eats into the same cap, so keep the Form 16 from every employer that paid you encashment — you will need those figures to compute the balance available.
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Disclaimer: results are estimates based on the inputs and published rules/rates, for information only — not investment, tax or legal advice. Verify important decisions with a qualified professional. See our full disclaimer.