Leave encashment calculator
Tell me how much leave you have left and your Basic + DA, and I’ll show what it’s worth and how much of it is tax-free when you leave.
Earned or privilege leave to be encashed.
Your leave policy says which; 30 is most common.
Basic + DA (plus any commission tied to turnover). Starts at your Basic + DA.
Leave encashment
₹50,000
30 days × ₹50,000 ÷ 30
- Tax-free part
- ₹50,000
- Taxable part
- ₹0
- Amount you receive (lowest, so exempt)
- ₹50,000
- Government limit
- ₹25,00,000
- 10 × average monthly salary
- ₹5,00,000
- Leave credit (max 30 days a year) × average daily salary
- ₹50,000
Private-sector employees: the tax-free part is the lowest of the four amounts below, and the ₹25,00,000 limit is for your whole career. Government employees’ leave encashment on retirement is fully exempt.
Estimates for planning, not tax or legal advice. Rules change with each Budget and differ by employer, so check your offer letter, payslip or a professional before you act.
How it’s calculated
Most employers pay unused earned leave at Basic + DA for each day. Your leave policy sets the divisor and any cap on how many days you can carry or encash.
Tax
Leave encashed while you’re still employed is taxed as salary in full. Leave encashed when you leave the job (resignation or retirement) is partly tax-free for private-sector employees. The tax-free part is the lowest of:
- the amount you actually receive;
- ₹25,00,000 (CBDT Notification 31/2023, from 1 April 2023), for your whole career;
- 10 × your average monthly salary over the last 10 months;
- your leave credit, counted at no more than 30 days for each completed year of service, × your average daily salary (monthly ÷ 30).
“Salary” here means Basic + DA (where DA counts for retirement benefits), plus any commission that is a fixed percentage of turnover. The calculator counts your whole balance as unused leave, up to 30 days a year; if you took leave in past years, your actual leave credit for the fourth limb may be lower.
Worked example. 300 days of leave, Basic + DA of ₹50,000, divisor 30, 5 years of service, on leaving: encashment = 300 × ₹50,000 ÷ 30 = ₹5,00,000. The four limbs are ₹5,00,000 (actual), ₹25,00,000 (limit), ₹5,00,000 (10 months) and 150 days (30 × 5 years) × ₹1,666.67 = ₹2,50,000. The lowest is ₹2,50,000, so that much is tax-free and the other ₹2,50,000 is taxed as salary.
Sources: Income-tax Act 1961, section 10(10AA); CBDT Notification 31/2023 (Income Tax Department). The Income-tax Act, 2025 applies from tax year 2026-27 and renumbers these sections.
Questions people ask
How is leave encashment calculated?
Usually leave balance in days × monthly Basic + DA ÷ 30. Some employers divide by 26. For example, 30 days on ₹50,000 Basic + DA is ₹50,000.
Is leave encashment taxable?
While you’re employed, yes, in full, as salary. When you leave the job, private-sector employees get part of it tax-free: the lowest of the actual amount, ₹25,00,000, 10 months’ average salary and the leave-credit limit.
What is the leave encashment exemption limit?
₹25,00,000 for private-sector employees, raised from ₹3,00,000 by CBDT Notification 31/2023 with effect from 1 April 2023. It is a lifetime limit across all your employers.
Is leave encashment on Basic or gross?
Most leave policies use Basic + DA. A few use gross pay; check your company’s leave policy.
Is leave encashment tax-free for government employees?
Central and state government employees’ leave encashment on retirement is fully exempt. The limits on this page are for everyone else.
Does the Income-tax Act 2025 change this?
The Income-tax Act 2025 replaces the 1961 Act from April 2026 and renumbers its sections. The leave encashment exemption carries over, but forms and Form 16 may cite a new section number.
Numbers done. Now the decision.
Tell me what the numbers mean for you, and I’ll help you decide what to do next.