Leave encashment calculator
Enter your monthly basic + DA and the number of leave days being encashed.
How leave encashment is worked out
Leave encashment is the cash paid for unused earned or privilege leave when you resign or retire. For monthly-rated employees the common formula is:
Encashment = (Basic + DA) ÷ working days per month × leave days encashed
Employers usually treat a month as 26 working days (some use 30), so use whichever your employer's policy states. Only earned or privilege leave is normally encashable, and policies often cap the number of days.
On tax: for non-government employees, leave encashment received at retirement is exempt under Section 10(10AA) up to a lifetime limit of Rs 25 lakh; encashment on resignation during service is generally taxable as salary income.
Sources: Income-tax Act, 1961 — Section 10(10AA). Verify against your employer's leave policy and your leave balance before relying on the figure. This tool is an estimate.
Worked example
Basic + DA Rs 30,000 per month, 20 leave days encashed, 26 working days per month. Per day = 30,000 / 26 = Rs 1,153.85. Encashment = 1,153.85 x 20 = Rs 23,077. On retirement, this is exempt under Section 10(10AA) up to Rs 25 lakh; on resignation during service it is generally taxable.
Frequently asked questions
How is leave encashment calculated?
For monthly-rated employees, leave encashment is usually (Basic + DA) divided by the number of working days in a month, multiplied by the number of leave days being encashed. Employers commonly use 26 working days per month, though some use 30; use the divisor your employer's policy states.
Is leave encashment taxable?
For non-government employees, leave encashment received at the time of retirement is exempt under Section 10(10AA) up to a lifetime limit of Rs 25 lakh. Leave encashment received on resignation during service is generally taxable as salary income. Government employees have a different, fully exempt treatment.
Which leave days are usually encashable?
Employers usually allow only earned or privilege leave to be encashed, not casual or sick leave, and often cap the number of days. Check your employer's leave policy and your leave balance before relying on the figure.
Does leave encashment include allowances?
The common formula uses basic pay plus dearness allowance only. Most other allowances are excluded. Confirm which components your employer treats as salary for encashment.
When leave is encashed
Employers usually encash only earned or privilege leave, and often cap the number of days. Casual and sick leave are normally not encashed. The payout uses basic pay plus dearness allowance, divided by the working-day convention your employer follows. On tax, leave encashment received at retirement is exempt up to Rs 25 lakh for non-government employees, while encashment on resignation during service is usually taxable as salary. Check your leave policy for the cap and the eligible leave type before you plan around the amount.
Leave encashment: what to check first
Three questions decide how much you actually receive. First, which leave types can be encashed: most policies allow earned or privilege leave, not casual or sick leave. Second, whether there is a cap on the number of days, because many employers limit it. Third, the salary basis: usually basic pay plus dearness allowance, divided by the working-day convention in your policy. The divisor matters, because twenty-six working days gives a higher per-day value than thirty. On tax, the treatment depends on when you leave. Encashment at retirement is exempt up to twenty-five lakh rupees for non-government employees, while encashment on resignation during service is generally taxed as salary. If you are planning an exit, ask human resources for the exact leave balance and the policy clause in writing.
Planning around unused leave
Unused leave is a quiet asset. Many people forget it until the last week. Check your balance early. Ask which types can be converted to money. Ask about the cap, because most policies have one. Ask for the divisor the company uses, since it changes the amount. If you are retiring, the treatment is generous. If you are resigning, it is usually taxed. Plan the timing if you can. Some employers let you take leave instead of cashing it. That can be better in a higher tax year. Get the leave ledger in writing. Compare it with your own records. Then confirm the amount in the final statement.
About this tool
Written and maintained by the AccoNova editorial and payroll team, and last reviewed on (first published ). This is a free public calculator and an estimate, not a payslip, a tax return or professional advice. Figures depend on your salary structure, exemptions, state rules and current statutes — verify before relying on a result. AccoNova publishes product guidance and educational resources; no independent qualified statutory reviewer is claimed.
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