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Leave Encashment Calculator

Calculate Your Leave Encashment

Calculate the amount you receive for unused leave balance at resignation, retirement, or year-end.

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Leave encashment = (Basic + DA) / 30 × Unused leave days

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Leave Encashment Formula

Leave Encashment = (Basic Salary + DA) ÷ 30 × Unused Leave Days

The daily salary is calculated by dividing the monthly Basic + DA by 30 calendar days. This daily rate is then multiplied by the number of unused leave days to arrive at the encashment amount.

Tax Rules for Leave Encashment

  • On retirement: exempt up to ₹25 lakhs for non-government employees
  • Government employees: fully tax-exempt
  • During service: fully taxable as salary income
  • On resignation: exempt subject to Section 10(10AA) limits
  • Maximum 30 days per year of service is considered for exemption
  • Only earned/privilege leave is eligible, not casual or sick leave

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Frequently Asked Questions

What is leave encashment? −

Leave encashment is the monetary compensation an employee receives for unused leave balance. It can be paid during service (for accumulated leave), at the time of resignation, or upon retirement.

How is leave encashment calculated? −

Leave encashment is calculated as: (Basic Salary + Dearness Allowance) divided by 30, multiplied by the number of unused leave days. Only earned/privilege leave is typically eligible for encashment.

Is leave encashment taxable? −

Leave encashment received during service is fully taxable. On retirement or resignation, it is exempt up to ₹25 lakhs for non-government employees (as per Budget 2023). For government employees, it is fully exempt.

What types of leave can be encashed? +

Typically only earned leave (also called privilege leave or annual leave) can be encashed. Casual leave and sick leave are generally not eligible for encashment, though company policy may vary.

What is the maximum leave encashment exemption? +

The maximum tax exemption for leave encashment on retirement for non-government employees is ₹25 lakhs (increased from ₹3 lakhs in Budget 2023). This is a lifetime limit across all employers.

Can I encash leave while still employed? +

Yes, many companies allow leave encashment during service for accumulated leave beyond a certain limit. However, leave encashment received during service is fully taxable as salary income.

Have more questions? Check our knowledge base or contact us.