Leave Encashment Calculator
Estimate how much you will receive for unused earned leave at retirement, how much is exempt from tax under Section 10(10AA), and how much lands in your taxable salary.
Reviewed by the CalcCafe editorial team · Last updated 18 July 2026 · How we test our tools
Example
Take an employee retiring with an average monthly salary (basic + DA) of ₹60,000 over the last 10 months, 120 days of unused earned leave, and 15 completed years of service. Encashment received = 60,000 ⁄ 30 × 120 = ₹2,40,000. The four exemption limbs are: actual amount ₹2,40,000; statutory cap ₹25,00,000; 10 months’ salary ₹6,00,000; and the 30-days-a-year measure 60,000 ⁄ 30 × min(120, 30 × 15 = 450) = ₹2,40,000. The least is ₹2,40,000, so the entire payout is exempt and the taxable amount is ₹0.
How it works
Encashment received = (monthly salary ⁄ 30) × leave days encashed, using the average basic + DA of the 10 months before retirement. For a non-government employee retiring (including by resignation), the exemption under Section 10(10AA)(ii) is the least of four amounts: (a) the amount actually received, (b) the government-notified ceiling of ₹25,00,000, (c) 10 × average monthly salary, and (d) the cash value of unutilised leave computed as if leave entitlement were capped at 30 days per completed year of service — (salary ⁄ 30) × min(days encashed, 30 × completed years). Taxable amount = received − exemption, taxed as salary at your slab rate.
Good to know
The tax treatment splits three ways. Central and State Government employees who encash leave at retirement are fully exempt under Section 10(10AA)(i) — no monetary limit applies. Non-government employees get the least-of-four exemption under Section 10(10AA)(ii) that this calculator applies. And anyone — government or private — who encashes leave while still in service pays full tax on it as salary income, though relief under Section 89 (claimed via Form 10E) can spread the burden where the amount relates to earlier years.
The ₹25,00,000 ceiling is recent and material. The limit had been stuck at ₹3,00,000 since 2002, badly out of step with modern salaries, until the Finance Act 2023 announcement was implemented by CBDT Notification No. 31/2023, raising it to ₹25 lakh for retirements on or after 1 April 2023. It is a lifetime aggregate: if you claim the exemption on encashment from more than one employer, in the same year or across different years, the combined exemption cannot exceed ₹25 lakh.
The 30-days-per-year cap in limb (d) is the piece that most often trims the exemption. The law values your unutilised leave as if you earned at most 30 days of leave per completed year of service, regardless of how generous your employer’s policy is. An employee whose company credits 42 days a year and who has banked 400 days after 12 years is treated, for exemption purposes, as having at most 30 × 12 = 360 days — the excess 40 days’ worth of encashment falls straight into taxable salary. Completed years are truncated, not rounded: 14 years and 9 months counts as 14.
“Salary” for this computation has a precise meaning: basic pay plus dearness allowance (to the extent it forms part of retirement benefits) plus any fixed-percentage commission on turnover — averaged over the 10 months immediately preceding retirement. HRA, special allowances and bonuses are excluded, which is why the exemption often comes out lower than people expect from their gross CTC. Note also that the Section 10(10AA) exemption on retirement encashment remains available under the new (default) tax regime, unlike many other exemptions, so this calculation matters under both regimes.
Frequently asked questions
Is leave encashment fully tax-free for government employees?
Yes. Leave encashment received by a Central or State Government employee at retirement or superannuation is fully exempt under Section 10(10AA)(i), with no monetary ceiling. The least-of-four limit applies only to non-government employees.
What if I encash leave while still employed?
Encashment during continued service is fully taxable as salary for everyone, government or private, with no Section 10(10AA) exemption. You may claim relief under Section 89 by filing Form 10E if the payment bunches income from earlier years into one year.
Does this calculator send my salary details anywhere?
No, it runs entirely in your browser. Your salary and leave figures never leave your device, and the page works offline once loaded.
Is this leave encashment calculator free?
Yes, completely free with no sign-up and no limits. Treat the output as an educational estimate and confirm your exact exemption with your employer or tax adviser.
People also ask
What is the maximum leave encashment exemption for private employees?
25 lakh rupees, a lifetime aggregate limit that applies to retirements on or after 1 April 2023 per CBDT Notification 31/2023. Before that, the ceiling was 3 lakh rupees. The actual exemption is the least of this cap, the amount received, 10 months average salary, and the 30-days-per-year leave value.
How is salary defined for the leave encashment exemption?
It means basic salary plus dearness allowance that counts for retirement benefits, plus commission at a fixed percentage of turnover, averaged over the 10 months immediately before retirement. House rent allowance, bonuses and other allowances are excluded from the computation.
Is leave encashment on resignation eligible for exemption?
Yes. Courts have held that retirement in Section 10(10AA) includes leaving service by resignation, so a non-government employee who resigns and encashes accumulated leave can claim the same least-of-four exemption. Encashment taken while continuing in the same job does not qualify.
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Sources & references
These tools follow our methodology and provide educational estimates only — verify important figures with a qualified professional.