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Leave Encashment Calculator
Work out the tax-exempt and taxable portions of your encashed leave. Adjust any input below and your results update instantly.
Understanding leave encashment
The concept, the motivation, and what to watch out for.
Cash for leave you never took — taxed very differently depending on when
Leave encashment is the cash value of earned leave you didn't use, paid out either during your job or when you leave it. The distinction matters enormously for tax: encashment while still employed is fully taxable, no exceptions, while encashment at retirement or resignation can be exempt up to ₹25 lakh — but only up to the smallest of four separate limits, not the full amount automatically.
This calculator applies all four limbs of that exemption test at once, so you can see exactly which one ends up being the binding constraint on your own numbers.
Timing changes everything
The exact same cash amount is either fully taxable or largely tax-free, purely based on whether you received it during service or at retirement/resignation.
The exemption isn't just "₹25 lakh"
It's the LEAST of four limits — the actual amount, ₹25 lakh, 10 months' average salary, or the cash equivalent of leave capped at 30 days per year of service. Any one of these can end up being the tightest constraint.
How this calculator helps
Enter your salary, leave days, and tenure — see which of the four limbs actually caps your exemption, and how much ends up taxable.
Calculate your leave encashment
Fill in the starred fields on the left — your results update instantly on the right.
Your details
Received at retirement/resignation
Off assumes it’s encashed during service instead — fully taxable either way.
Government employee
On removes the ₹25L cap and the other exemption limits entirely.
e.g. ₹50,000 a month
e.g. 180 days
e.g. 15 years
These are example numbers. Edit any input on the left to see your own.
Your tax-exempt amount
₹3.00 L
₹3.00 L received in total
Actual amount
₹3.00 L
Taxable
₹0
₹3.00 L received, ₹3.00 L exempt, ₹0 taxable.
All four exemption limits, side by side
The smallest of these four figures is what actually caps your exemption.
ComponentAmountStatus
Actual amount received₹3.00 L
Before exemption
100% of the amount received
₹25L ceiling₹25.00 L
Limit 1 of 4
100% of the amount received
10-month average salary₹5.00 L
Limit 2 of 4
100% of the amount received
Leave cap (30 days/year)₹3.00 L
Limit 3 of 4
100% of the amount received
Tax-exempt portion₹3.00 L
Smallest of all limits
100% of the amount received
Taxable portion₹0
Taxed at slab rate
0% of the amount received
Compare scenarios
See how timing or employee type changes your tax-exempt amount.
Your plan
At retirement/resignation
₹3.00 L
Tax-exempt amount
Baseline
During service instead
Same salary & days
₹0
Tax-exempt amount
-₹3.00 L
Government employee instead
Exemption ceiling changes
₹3.00 L
Tax-exempt amount
No change
Worked example, using your numbers
A step-by-step walkthrough of how your leave encashment is taxed.
Step 1 · Amount received
180 days at your per-day salary comes to
₹3.00 L
Step 2 · Tax-exempt portion
The smallest of all four exemption limits is
₹3.00 L
Step 3 · Taxable portion
Added to your taxable salary income for the year
₹0
✓
Of your ₹3.00 L leave encashment, ₹3.00 L is tax-free.
Personalised insights
What your numbers reveal, and what changing them would do.
The binding limit here is the 30-days-per-year leave cap
Of the four limits this calculator checks, the 30-days-per-year leave cap is the smallest for your numbers — that's what actually caps your exemption.
Receiving this during service instead would reduce your tax-free amount by ₹3.00 L
Encashing the same leave while still employed would make the entire amount taxable, with zero exemption.
₹0 adds to your taxable income this year
The entire ₹3.00 L is tax-free.
As a private-sector employee, ₹0 more would be exempt as a government employee
Government employees aren't subject to the ₹25L ceiling or any of the other three limits at all.
How this is calculated
Every step of the math behind your result, shown in the open.
Actual amount received
Salary = monthly Basic + DA, Days = leave days being encashed, Amount = the actual cash you receive
Per-day salary is your monthly Basic + DA divided by a standard 30-day month, multiplied by however many leave days you're encashing.
Example: ₹50,000 ÷ 30 × 180 days → ₹3.00 L
The exemption is the smallest of four limits
10mo. Avg = 10 months of your average salary, Leave Cap = cash equivalent of leave capped at 30 days per year of service, Exempt = the tax-free portion
All four limits apply simultaneously — whichever is smallest on your numbers is the one that actually binds.
Example: min(₹3.00 L, ₹25L, ₹5.00 L, ₹3.00 L) → ₹3.00 L
Taxable portion
Amount = the actual cash received, Exempt = the tax-free portion from the formula above, Taxable = added to your income and taxed at your slab rate
Whatever isn't exempt gets added to your taxable salary income for the year you receive it.
Example: ₹3.00 L − ₹3.00 L → ₹0 taxable
Assumptions
- Your monthly salary is assumed unchanged over the 10 months before retirement/resignation — the exemption formula actually averages your real salary over that period.
- All standing leave is assumed encashed in a single payout — the formula doesn't separately track leave already availed or encashed earlier during service.
- Death or disablement (fully exempt regardless of employer type) isn't modeled as a toggle here, since it isn't a scenario this calculator's inputs describe.
- Figures are indicative — not financial or legal advice.
Did you know?
A few facts behind how leave encashment is taxed in India.
₹25L
The limit was raised more than 8x in one notification
CBDT Notification 31/2023 raised the non-government exemption limit from ₹3 lakh — a figure that had stood unchanged since 2002 — to ₹25 lakh overnight, effective 1 April 2023.
4
The exemption is really four separate races to the bottom
Actual amount, ₹25 lakh, 10 months' average salary, and the leave-days cap all apply at once — the smallest of the four wins, not a single flat limit.
30
Only 30 days of leave count per year, no matter your company's policy
Some employers let earned leave accumulate at 35 days a year or more — but the tax exemption formula still only credits 30 days per completed year of service.
0
During service, there's no exemption at all
The entire ₹25 lakh framework only applies at retirement, resignation, or death — leave encashed mid-career is taxed exactly like your regular salary.
Unlimited
Government employees skip the whole test
Central and state government employees' leave encashment at retirement is fully exempt, with no ceiling and none of the four limbs applying.
Frequently asked questions
Straight answers to the questions we hear most about leave encashment.
Why is leave encashment during service fully taxable, but not at retirement?
Section 10(10AA)'s exemption specifically applies only to amounts received on retirement, resignation, or death — leave encashed while you're still employed is treated as regular salary income under Section 17(1), with no special exemption at all.
Is the ₹25 lakh limit a fresh allowance every time I change jobs?
No — it's a lifetime aggregate across every employer you've ever received leave encashment from at retirement or resignation, the same way Gratuity's ₹20 lakh ceiling works. If you've already used part of it with a previous employer, only the remainder is available now.
Why would my exemption be less than ₹25 lakh even if my actual amount is smaller?
Because the exemption is the LEAST of four separate limits, not just the smaller of your amount and ₹25 lakh. Even a modest leave encashment amount can be partly taxable if your 10-month average salary or your leave-days cap (30 days × years of service) is smaller than the amount you actually received.
What happens if I've accumulated more leave than 30 days per year of service?
Anything beyond 30 days per completed year simply doesn't count toward the exemption calculation, even though your employer may pay out the full accumulated balance — the excess amount you receive is proportionally more likely to end up taxable.
Are government employees taxed differently?
Yes — central and state government employees get an unlimited exemption on leave encashment received at retirement, with no ₹25 lakh ceiling and none of the other three limbs applying at all.
Does leave encashment received by my family after my death get taxed?
No — leave encashment paid to legal heirs after an employee's death is fully exempt from tax, regardless of employer type, though this specific scenario isn't a toggle this calculator models directly.
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Learn more
Articles to go deeper on the ideas behind this calculator.
Fundamentals
Leave encashment during service vs. at retirement
Why the exact same payout can be fully taxable or largely tax-free.
4 min read
Fundamentals
Gratuity's ₹20 lakh cap, explained
Why the same figure caps both the payout and the tax exemption — for different reasons.
5 min read
Strategy
The four-limb leave encashment exemption test
How to figure out, ahead of time, which limit will actually bind for you.
5 min read