🌴 Leave Encashment Calculator

Determine your legally mandated severance payout securely.

✅ Last verified: September 2026 · Source: Methodology & sources

Last Drawn Basic Salary + DA (₹/month)

₹

Earned Leaves Encashed (days)

Completed Years of Service

Employee Type

Total Leave Encashment

₹0

Tax-Free Amount ₹0

Taxable Portion (if any) ₹0

Leave Encashment — Rules and Tax Exemption under Section 10(10AA)

Leave encashment is payment for unused earned leaves at resignation or retirement. The tax treatment differs significantly between government and private sector employees.

Formula

Leave Encashment = (Monthly Basic Salary ÷ 26) × Number of Leaves. The divisor 26 represents standard working days per month.

Tax Exemption — Private Sector

Exempt amount = minimum of: (a) actual encashment, (b) 10 months average salary, (c) 30 days × years of service at daily rate, (d) ₹25 lakh lifetime limit. Government employees get full exemption at retirement.

Worked Example

Neha resigns after 8 years with 45 days pending leave and ₹60,000 basic. Encashment = (60,000÷26)×45 = ₹1,03,846. Max under rule (c) = 30×8 = 240 days, but she has only 45. Exemption = ₹1,03,846 — fully tax-free since it's below all limits.

Is leave encashment taxable at resignation? +

For private sector: partially exempt under Section 10(10AA)(ii) — minimum of 4 conditions. For government: taxable at resignation but fully exempt at retirement.

What is the maximum tax-free leave encashment? +

₹25 lakh lifetime limit for private sector employees (enhanced from ₹3 lakh earlier). This is cumulative across all employers in your career.

🔄 Last Updated: September 2026 · FY 2025-26

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About the Leave Encashment Calculator — Tax & Salary Guide

This free Leave Encashment Calculator is designed specifically for Indian users, using documented calculation methods, with source references shown where applicable. Rules and formulas are reviewed for the applicable current period; tax-year-specific rules are identified on the page. No sign-up, no download, and no charge — results are instant and displayed in Indian number format (lakhs and crores).

How to Use This Calculator

Enter your values in the input fields above and click the Calculate button. Results update immediately. You can modify any input and recalculate as many times as needed. All inputs are processed locally in your browser. Optional Save Setup stores the setup only in your browser; Share Setup creates a URL containing encoded setup values. See the Privacy Policy for details.

Formula and Calculation Method

The Leave Encashment Calculator uses the documented calculation method described on this page. Where rules, rates or thresholds can change, review the cited source and effective date shown here before relying on the result for an important decision.

Understanding Your Results

Results are estimates based on the inputs you provide. Actual outcomes can vary with the rules, rates, prices, biological conditions, or other assumptions that apply to your situation. Review the assumptions and effective date shown on this page before using a result for an important decision.

Why Use CalcuTools India

CalcuTools India is an independent, free calculator platform covering personal finance, income tax, salary, loans, investments, retirement planning, and health, with formulas and applicable rules checked against the stated methodology or primary/reference sources where applicable. We are not affiliated with any bank, insurance company, NBFC, or financial products distributor. Our calculators are free to use. Some pages may contain clearly labelled partner or affiliate offers; these do not affect the calculation result.

CalcuTools India · India-focused calculators · Updated September 2026 · Applicable rule year shown on this page · About Us · How We Verify · Editorial Policy · Disclaimer

Leave Encashment in India — Rules, Tax, and Planning

Leave encashment is the monetary payment for unused earned leaves. The tax treatment differs significantly based on whether you are a government or private sector employee, and whether encashment happens during service or at exit.

Earned Leave vs Casual Leave

Only earned leave (also called privilege leave or annual leave) can typically be encashed. Casual leave and sick leave usually lapse if unused. The number of earned leaves that can be accumulated varies by employer — typically 30 days per year, with many companies capping total accumulation at 60-90 days.

The Rs 25 Lakh Lifetime Exemption

The Finance Act 2023 enhanced the leave encashment exemption for non-government employees from Rs 3 lakh to Rs 25 lakh. This is a cumulative lifetime limit across all employers. If you received Rs 5 lakh in leave encashment from a previous employer, your remaining exemption is Rs 20 lakh.

Strategy: Maximise Leaves Before Retirement

Do not use all your earned leaves frivolously. Accumulating maximum leaves (usually 90-120 days) before retirement or resignation can result in a significant tax-free payment. At Rs 80,000 basic salary and 90 days leave: encashment = (80,000/26) x 90 = Rs 2,76,923 — entirely tax-free if under the exemption limits.

Source: Section 10(10AA), Income Tax Act · incometax.gov.in · Last Updated September 2026