This leave encashment calculator turns your unused earned leave into rupees and then does the part most tools skip: it works out how much of that payout is exempt under Section 10(10AA) and how much is taxable. Enter your last drawn monthly Basic plus DA, the leave days being paid out and your completed years of service, and it runs the full four way exemption test. If you are starting from a CTC rather than a Basic figure, split the package first with the salary breakup calculator, and for the other lump sum that lands at retirement use the gratuity calculator. No sign-up, and nothing you type leaves your browser.
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| Statutory Limit | Amount | Does It Cap You |
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This leave encashment calculator answers two questions that usually get answered separately and badly. First, what your unused earned leave is actually worth in rupees, which depends on your last drawn Basic plus dearness allowance and on whether your employer divides the monthly figure by 30 calendar days or 26 working days. Second, and this is the part that decides what reaches your bank, how much of that payout escapes income tax under Section 10(10AA). Most leave encashment tools stop at the first question and leave you to guess at the second, which is why people are routinely surprised by the TDS on their final settlement.
The exemption is not a single number. For a private sector employee retiring or resigning it is the lowest of four separate amounts, and which one bites depends on your salary, your leave balance and how long you served. A government employee separating from service is exempt without any ceiling at all. Anyone encashing leave while still employed pays tax on every rupee. This page runs the full test, shows you all four limits rather than only the one that caught you, and tells you which days of leave earned no exemption. The taxable part is then ordinary salary income, so carry it to the income tax calculator to see what it costs at your slab rate, and compare the whole picture against your final settlement with the take-home salary calculator. Everything here sits inside the wider set of salary calculators for India.
Three numbers and three dropdowns. The payout, the four way exemption test and the taxable balance all appear without a page reload.
Jump back to the leave encashment calculator and run your own figures.
Private sector, encashed on separation, 30 day divisor, no exemption used in earlier years. Every figure below was produced by the calculator on this page, not written by hand.
| Step | ₹45,000, 60 days, 12 years | ₹60,000, 200 days, 4 years | ₹3,00,000, 300 days, 30 years |
|---|---|---|---|
| Monthly Basic plus DA | 45,000 | 60,000 | 3,00,000 |
| Per day value at a 30 day divisor | 1,500 | 2,000 | 10,000 |
| Unused earned leave days | 60 | 200 | 300 |
| Gross encashment payout | 90,000 | 4,00,000 | 30,00,000 |
| Limit A, actual amount received | 90,000 | 4,00,000 | 30,00,000 |
| Limit B, ten months average salary | 4,50,000 | 6,00,000 | 30,00,000 |
| Leave days credited, 30 per completed year | 60 | 120 | 300 |
| Limit C, cash equivalent of credited leave | 90,000 | 2,40,000 | 30,00,000 |
| Limit D, ₹25,00,000 less exemption already used | 25,00,000 | 25,00,000 | 25,00,000 |
| Which limit decides the exemption | A and C, tied | C | D |
| Exempt under Section 10(10AA) | 90,000 | 2,40,000 | 25,00,000 |
| Taxable as salary income | 0 | 1,60,000 | 5,00,000 |
| Tax free share of the payout | 100.0% | 60.0% | 83.3% |
Three different limits bite in those three columns, which is the whole reason the test exists. In the first, nothing caps the employee: 60 days of leave over 12 years is well inside the 30 days a year credit, the payout is far below ten months of salary, and the whole ₹90,000 is exempt. In the second, the employee banked 200 days in only four years, so the exemption credits 120 days and not 200, and ₹1,60,000 becomes taxable purely because the leave accrued faster than the law recognises. In the third the employee did nothing wrong at all: 300 days over 30 years is exactly the credit the law allows and ten months of salary would have covered the lot, but the ₹25,00,000 lifetime ceiling stops the exemption ₹5,00,000 short. Note also that limits B and C land on the same figure whenever the credited leave is exactly 300 days, because ten months of salary and 300 days at a thirtieth of monthly salary are arithmetically the same amount. To see what the taxable column costs you, run it through the income tax calculator, and for the other retirement lump sum with its own separate ceiling use the gratuity calculator.
Leave encashment is the money an employer pays for earned leave you accumulated and never took. It is a real salary component, it usually arrives as a single lump sum in a final settlement, and for someone leaving after a long career it can be one of the largest cheques of their working life. This calculator exists because that lump sum has two distinct arithmetic problems attached to it, and they are governed by two entirely different authorities.
The first problem is what the payout is. That is your employer's leave policy: which leave types are encashable, how many days you were allowed to carry forward, and whether the monthly salary is divided by 30 or by 26 to get a per day rate. None of that is statutory. The second problem is how much of the payout you keep, which is entirely statutory and has nothing to do with your employer at all. This page computes both and keeps them visibly separate, because conflating them is how people end up expecting a number that never arrives.
What this page is not is a tax return. It returns the exempt and taxable split, not the tax itself, because the tax on the taxable portion depends on your total income for the year and not on this payout alone. That belongs to the income tax calculator, and if you are weighing which tax system to be on while a large settlement lands, the old versus new tax regime calculator is the right page. Everything here sits inside the wider set of salary calculators for India.
The leave encashment formula is short, and the only variable in it that people get wrong is the divisor. Earned leave is valued on Basic salary plus dearness allowance, the same narrow base used for provident fund and gratuity, and never on gross salary or CTC:
A worked example makes it concrete. Take a monthly Basic plus DA of ₹60,000 with 120 unused earned leave days after 10 completed years. On the 30 day divisor the per day value is ₹2,000 and the payout is ₹2,40,000, all of which is exempt. On the 26 day divisor the per day value is ₹2,307.69 and the payout rises to ₹2,76,923, which sounds like an unambiguous improvement and is not quite. The exemption is still computed at a 30 day rate, so it stays at ₹2,40,000, and the extra ₹36,923 the 26 day rule paid you is taxable. You are still better off by the after tax value of that ₹36,923, but the gap between the two divisors is smaller than the payout figures suggest.
Earned leave is also the only leave type this arithmetic normally applies to. Casual leave and sick leave are not encashable in most organisations and simply lapse at the end of the leave year, which is covered in the section below on which leaves qualify.
Section 10(10AA) of the Income-tax Act is the provision that decides how much of your payout is tax free, and it splits into two clauses that produce very different answers. Which clause applies to you turns on one question that has nothing to do with how much you earned: who your employer is.
The four amounts tested for a non-government employee are the actual encashment received, ten months of average monthly salary, the cash equivalent of leave to credit where that credit is capped at 30 days for each completed year of service, and the ₹25,00,000 lifetime ceiling. The lowest of the four is the exempt amount and the remainder is taxable salary. That ceiling was raised from ₹3,00,000, a figure fixed back in 2002 and left untouched for two decades, and the current limit was notified by the Central Board of Direct Taxes with effect from 1 April 2023. The government's own announcement of that change is worth reading before you rely on any calculator, including this one, because it also settles a point most summaries get wrong: the Ministry of Finance notification raising the leave encashment exemption to ₹25 lakh states plainly that the aggregate exempt amount cannot exceed that limit where payments come from more than one employer, and is further reduced by any exemption already allowed in an earlier year.
Three consequences follow from that, and all three catch people out. The ceiling is a career total, not an allowance that resets when you change jobs. Exemption you claimed at a previous employer permanently reduces what is available now. And a payroll team that assumes otherwise will under deduct TDS, leaving you with the shortfall at filing.
Timing is the other thing that decides everything. The exemption exists only for leave encashment received on separation, whether that is superannuation, retirement or resignation. Money paid out for leave while you are still employed, such as an annual surrender of carried forward days, is fully taxable as salary under Section 17(1) with no exemption at all, and this is true for government and private employees alike. Where such an in service encashment relates to leave earned in earlier years, relief under Section 89 may be available, claimed on Form 10E, which the Income Tax Department lists among the forms an employee files for salary received in arrears. That is a question for a tax professional rather than a calculator. Leave encashment paid to the legal heirs of an employee who dies in service is not taxable in their hands.
One point of genuine practical friction deserves stating. Resignation is covered: the statute exempts encashment received at retirement "whether on superannuation or otherwise", and the notification uses the same phrase. Some payroll departments nevertheless treat resignation more conservatively than retirement and deduct TDS on the whole amount. If that happens to you the exemption is claimed in your return rather than lost, and the mismatch between your Form 16 and your computation is expected rather than an error.
Not every leave type converts to cash, and the number your employer pays for is not always the number the tax exemption recognises. Those are two separate caps and they are frequently confused with each other.
Earned leave, also called privilege leave or annual leave, is the category that encashes. Under the Factories Act and the various state Shops and Establishments Acts, employees typically accrue earned leave at roughly one day for every twenty days worked, and most employers allow a balance to be carried forward with encashment on separation. Casual leave and sick leave sit outside this entirely: in most organisations they cannot be carried forward, cannot be encashed, and lapse at the end of the leave year.
Central government employees can accumulate up to 300 days of earned leave over a career, and the whole balance is encashable at retirement. They may also encash up to 30 days during service alongside leave travel concession, which is fully taxable like any other in service encashment. The detailed service rules that govern government and railway leave accounts are a separate subject from the tax treatment on this page, and your department's own leave rules are the authority on them rather than any calculator.
The cap that surprises private sector employees is the exemption side one. However many days your company allowed you to bank, the exemption credits leave at a maximum of 30 days for each completed year of service. An employee who accrued 45 days a year for ten years and left with 400 days in hand will be paid for all 400 by an employer who agreed to it, but only 300 of those days generate any exemption. The remaining 100 days are taxable regardless of the ₹25,00,000 ceiling and regardless of the ten month limit. Fractions of a year are ignored, so nine years and eleven months of service credits nine years of leave and not ten.
Private sector, encashed on separation, 30 day divisor, no exemption used in earlier years. Every row was computed by the engine on this page rather than typed from a reference chart, so the table and the tool can never drift apart.
| Monthly Basic plus DA | Days | Years | Gross Payout | Exempt | Taxable |
|---|---|---|---|---|---|
| ₹25,000 | 30 | 5 | 25,000 | 25,000 | 0 |
| ₹40,000 | 90 | 10 | 1,20,000 | 1,20,000 | 0 |
| ₹60,000 | 150 | 15 | 3,00,000 | 3,00,000 | 0 |
| ₹80,000 | 240 | 20 | 6,40,000 | 6,40,000 | 0 |
| ₹80,000 | 400 | 20 | 10,66,667 | 8,00,000 | 2,66,667 |
| ₹1,25,000 | 300 | 25 | 12,50,000 | 12,50,000 | 0 |
| ₹2,00,000 | 300 | 30 | 20,00,000 | 20,00,000 | 0 |
| ₹4,00,000 | 300 | 30 | 40,00,000 | 25,00,000 | 15,00,000 |
Read the two rows at ₹80,000 together. Same salary and same service, but 400 days of banked leave instead of 240, and the exemption stops at ten months of salary while the employer pays for every day. The ₹4,00,000 row is the only one where the lifetime ceiling is what bites. These figures exclude the tax itself, which depends on your total income for the year.
The obvious moment is a final settlement. You have resigned or retired, HR has quoted a leave encashment figure, and you want to know both whether the figure itself is right and what will actually reach your account after TDS. Running your own numbers before the settlement lands is the only realistic way to catch a payroll error, and the commonest errors are all visible here: gross salary used instead of Basic plus DA, the wrong divisor, or the old ₹3,00,000 ceiling applied by a system nobody updated.
It is also the right number well before you leave. If you are within a few years of retirement and sitting on a large leave balance, the 30 days per completed year credit and the ₹25,00,000 ceiling between them decide whether banking more leave is worth anything at all in tax terms. An employee already at the ceiling gains nothing further from hoarding leave and would be better off taking it. That is a planning decision, and it needs the arithmetic in advance rather than in the settlement letter.
Where a leave encashment figure is the wrong number is anything to do with monthly budgeting or comparing job offers. It is a one time payment on separation, not part of recurring pay, and treating it as salary distorts both. For the recurring picture use the in-hand salary calculator or the CTC to in-hand calculator, and for what your monthly Basic actually is inside a package, the salary breakup calculator.
The short version, before the detail: this is a statutory exemption engine, not a reader of your payslip and not a substitute for your Form 16. Where it makes an assumption or stops short, it says so here rather than burying it.
Limits B and C are defined on the average salary drawn during the ten months immediately preceding separation, and this calculator uses the last drawn monthly Basic plus DA as a stand in for that average. For most people the two are the same figure, because Basic rarely moves inside a final ten month window. If you had an increment or a DA revision during that period your true average is slightly lower than your last drawn figure, so both limits are slightly overstated here, and the exemption may be marginally smaller than shown. Where the payout sits close to a limit, work the ten month average out properly from your payslips.
For this section, salary means Basic plus dearness allowance where the DA forms part of retirement benefits, plus any commission paid as a fixed percentage of turnover. That last component is rare outside sales roles with a formal turnover linked commission, and it is deliberately not a separate input here because including it would invite people to add ordinary variable pay and bonus, which do not qualify. If you genuinely have turnover linked commission, add it to the Basic plus DA figure you enter.
The taxable part of leave encashment is added to your salary income and taxed at your slab rate, which depends on everything else you earned in the year. Returning a tax figure from this page alone would require assuming the rest of your income, and a plausible wrong number is worse than no number because you cannot tell it is wrong. The exempt and taxable split is what this tool stands behind. Carry the taxable figure to the income tax calculator, where your full income decides the rate.
Leave encashment paid at separation does not attract provident fund contributions, so unlike your monthly salary there is no EPF slice coming off this payout. What your employer will deduct is TDS under Section 192 on the taxable portion. That is the whole of the deduction picture on this particular payment, which is why the split shown above is closer to a final answer than most salary figures on this site.
How many days you may carry forward, whether unused leave is encashable at all on resignation as opposed to retirement, and which divisor payroll applies are all contractual rather than statutory. Some employers cap encashable leave well below what an employee accrued, and some settle only on retirement. Your appointment letter and the company leave policy are the authority on the payout side. This calculator computes what the stated inputs produce, and the statutory treatment of whatever is actually paid.
The ₹25,00,000 ceiling and the four way test reflect the position in force for the current financial year. Limits and their interpretation move, and a large settlement is exactly the situation where a small difference matters in rupees. Treat the output as a well founded estimate for planning and checking your employer's arithmetic, verify against the notification linked above, and take a qualified opinion before filing where the amounts are significant.
The people who get the most from this page are the ones holding a settlement figure they cannot reconcile. Someone who resigned after eight years, was quoted a leave encashment amount, and cannot see why TDS took a slice of it. A retiring employee with 300 banked days who needs to know whether the ₹25,00,000 ceiling reaches them. A PSU or bank employee who has been told their leave encashment is fully tax free and is about to discover it is not. An HR team sanity checking a final settlement before it goes out, or a payroll system that may still be applying the old ₹3,00,000 limit. And anyone still a few years from leaving who wants to know whether hoarding leave is worth anything, which the 30 days per completed year credit usually answers. If your question is about the other lump sum landing at the same time, the gratuity calculator is the page for it, and people who want the recurring monthly picture instead should start at the monthly salary calculator. Everything sits in the wider set of salary calculators for India.
Leave encashment equals your monthly Basic plus dearness allowance, divided by the payout divisor, multiplied by the unused earned leave days. Most employers divide by 30 calendar days, some by 26 working days. On a Basic plus DA of ₹60,000 with 150 unused days at a 30 day divisor, the per day value is ₹2,000 and the payout is ₹3,00,000. Gross salary and CTC are never used as the base, only Basic plus DA.
It depends entirely on when you receive it. Encashment received while you are still employed is fully taxable as salary, with no exemption, for government and private employees alike. Encashment received on separation is exempt under Section 10(10AA): wholly exempt with no ceiling for government employees, and for everyone else exempt up to the lowest of four amounts, one of which is a ₹25,00,000 lifetime ceiling. Anything above the exempt figure is taxable salary income.
Yes. The ₹25,00,000 exemption ceiling under Section 10(10AA)(ii) is the limit in force for FY 2026-27, which is assessment year 2027-28. It was notified by the Central Board of Direct Taxes with effect from 1 April 2023, replacing the ₹3,00,000 figure that had stood since 2002, and nothing since has changed it. The four way exemption test, the 30 days per completed year credit and the full exemption for government employees are all unchanged as well.
₹25,00,000, and it is a career total rather than a limit per job. The exemption is the lowest of four amounts: the actual encashment received, ten months of average salary, the cash equivalent of leave credited at 30 days per completed year of service, and that ₹25,00,000 ceiling less any exemption already allowed to you in an earlier year. Most people are capped by one of the first three long before the ceiling is reached.
Yes. Section 10(10AA) survives the new regime intact, so you do not need to opt out of it to claim leave encashment exemption. That sets it apart from most salary exemptions, which the new regime removed. The exempt amount is identical under both systems, and only the tax on the taxable balance differs, since that is charged at whichever slab rates apply to you. Compare the two systems on the old versus new tax regime calculator if a large settlement is landing.
Because the divisor is employer policy, not law. Thirty treats salary as covering every calendar day and is the commoner rule; twenty six treats it as covering working days only, which produces a higher per day rate and a larger payout. The catch is that the statutory cash equivalent is always computed at a thirtieth of monthly salary whichever divisor your employer uses, so the extra amount a 26 day rule pays you is taxable rather than exempt.
Resignation is covered. The statute exempts encashment received at retirement whether on superannuation or otherwise, and the notification raising the ceiling uses the same wording, so leaving voluntarily qualifies on the same terms as retiring. Some payroll departments are nevertheless conservative and deduct TDS on the whole amount when an employee resigns. If that happens the exemption is claimed in your return rather than lost, and your Form 16 will not match your own computation.
For government employees, yes, without any ceiling. Central government, state government and local authority staff separating from service are wholly exempt under Section 10(10AA)(i), however large the payout. PSU and nationalised bank employees are not government employees for this section, despite the public ownership, and are treated exactly like private sector employees: the four way test applies and the ₹25,00,000 ceiling applies. This is one of the commonest and costliest misunderstandings around leave encashment.
On Basic salary plus dearness allowance only, never on gross salary and never on CTC. It is the same narrow base used for provident fund and gratuity. House rent allowance, conveyance, special allowance, bonus and reimbursements are all excluded, which is why a leave encashment figure looks small against the salary people quote. If your gross is ₹1,10,000 but Basic plus DA is ₹55,000, the calculation uses ₹55,000. Split a CTC with the salary breakup calculator.
The payout itself is easy in a spreadsheet: Basic plus DA divided by the divisor, multiplied by leave days. The exemption is where a spreadsheet gets error prone, because it needs all four limits, the 30 days per completed year credit and any exemption you used in earlier years, and a formula that quietly transposes two of them still returns a plausible number. That is exactly what this page automates, and it prints all four limits so the arithmetic is checkable.
No. Every calculation runs in your browser using JavaScript. Nothing is sent to a server, written to a database or shared with anyone, and there is no account and no sign-up. Your Basic pay, your leave balance and your years of service exist only in the browser tab you have open, and they are gone the moment you navigate away or close it. Nothing is retained between visits either.
Your Basic plus DA and your leave balance in, the payout and the full Section 10(10AA) exemption test out, with the exempt and taxable split named. Free, private, and nothing you type is stored.
🏖️ Calculate My Leave EncashmentNeed the other lump sum that lands at the same time? Run the gratuity calculator, work out what the taxable part costs on the income tax calculator, or browse all of the salary calculators for India.