Calculator
Leave encashmentcalculator
Leave encashmentcalculator
Work out the payout for unused leave, and on resignation or retirement see how much of it is tax-free under section 10(10AA) and which of the four limits decides it.
Figures reviewed September 2026. Statutory rates change; confirm with the notification before filing.
Leave encashment
Per-day rate
₹1,333
Encashment amount
₹60,000
Tax-free
₹57,000
Taxable as salary
₹3,000
Why that much is tax-free
Ceiling
From 1 April 2023, ₹25,00,000 over a working life
₹25,00,000
10 months of average salary
₹3,80,000
Leave at up to 30 days a year of service
Valued at the average salary
₹57,000
Amount actually received
₹60,000
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<p style="font-size:12px"><a href="https://kuzhu.in/resources/leave-encashment-calculator?utm_source=embed">Free leave encashment calculator by Kuzhu HRMS</a></p>How encashment and its tax work
Salary per day × days
Encashment is the per-day salary times the leave days paid out. Most policies take basic plus DA and divide by 30; some divide by 26 working days, which pays about 15% more per day. The policy decides, not the law.
Which leave is encashable
Earned or privilege leave usually is; casual and sick leave usually are not. The leave policy and the state's Shops and Establishments Act or standing orders set the rules.
On exit: four limbs
For non-government employees the tax-free part is the smallest of ₹25 lakh, ten months of average salary, leave valued at up to 30 days per year of service, and the amount received.
₹25 lakh since April 2023
The ceiling was raised from ₹3 lakh to ₹25 lakh for retirements and resignations from 1 April 2023. It is a lifetime limit across employers.
In service: taxed in full
Leave encashed while still employed is part of the year's salary and taxed at slab rates. Government employees get their exit encashment tax-free in full.
Under the Labour Codes
The Occupational Safety, Health and Working Conditions Code lets workers carry forward up to 30 days of annual leave and requires encashment of leave due on exit, as the states notify their rules.
Questions people ask
How is leave encashment calculated?
Divide the monthly salary the policy uses, usually basic plus DA, by 30 or 26 as the policy says, and multiply by the leave days being paid. With basic and DA of ₹40,000 and 45 days of earned leave, that is ₹40,000 ÷ 30 × 45, or ₹60,000.
Is leave encashment taxable on resignation?
Partly. For non-government employees, the smallest of ₹25 lakh, ten months of average salary, leave valued at up to 30 days per completed year, and the actual amount is tax-free. The rest is taxed as salary.
Is leave encashment part of full and final settlement?
Yes. Unused encashable leave is paid in the full and final settlement along with the last salary, gratuity if eligible, and any bonus due, less recoveries such as notice pay or advances.
Can an employer refuse to encash leave?
Only where the policy and the applicable law do not require it, which is typically casual and sick leave. Earned leave due on exit is generally payable under state Shops and Establishments Acts and, as notified, the Labour Codes.
More free tools
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In Kuzhu
Kuzhu keeps the leave ledger that encashment is paid from, applies your policy's divisor and encashable leave types, and puts the amount and its tax treatment straight into the full and final settlement.
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