Leave Encashment Calculator

What leave encashment is

Most salaried employees earn a set number of leave days each year but rarely use all of them. When you retire or resign, employers typically pay you for the unused earned leave you have accumulated — this payout is called leave encashment. The amount is straightforward: a per-day salary, worked out as your monthly Basic plus dearness allowance divided by 30, multiplied by the number of unused leave days. This calculator does that arithmetic and then applies the tax rules so you see both the gross payout and what you actually keep.

Government vs non-government employees

The tax treatment splits sharply by employer type under Section 10(10AA) of the Income-tax Act:

• Government employees — central and state — receive their leave encashment on retirement entirely tax-free, with no ceiling.
• Non-government employees get only a partial exemption, and the rest is added to salary income and taxed at their slab rate.

This distinction is the single biggest driver of how much of your payout survives tax.

The least-of rule and the ₹25 lakh cap

For a non-government employee retiring or resigning, the exempt amount is the least of four figures:

• the actual leave encashment received;
• the ₹25,00,000 lifetime cap (raised in recent years from the old ₹3 lakh);
• ten months' average salary (Basic + DA) of the last ten months;
• the cash equivalent of unavailed leave, limited to 30 days for each completed year of service.

Because the calculator keeps the inputs light, it approximates the exemption as the least of the actual amount, the ₹25 lakh cap and ten months' salary — which is the binding limit in most real cases. The ₹25 lakh figure is a lifetime ceiling across all employers: if you claimed the exemption when leaving a previous job, that amount reduces what remains available now.

Timing matters

One rule catches people out: the exemption applies only to leave encashed on leaving service. If you encash leave while still employed, the whole amount is taxable in that year. So, where your policy allows, it is generally more tax-efficient to carry leave forward and encash it at retirement or resignation. Keep clear records of your accumulated days and the exemption you have already used, so you can claim the full benefit you are entitled to.