Leave Encashment Calculator (Earned Leave Payout & Tax)
This leave encashment calculator works out the cash value of your unused earned leave and how much of it is tax-free. Enter your monthly basic pay plus DA, your leave balance and years of service, and choose government or private employment.
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Calculator and results
Encashing 240 days of earned leave on a ₹80,000 monthly basic plus DA yields ₹6,40,000. For private/PSU employees, this entire amount is tax-free under Section 19, Table Sl. No. 14 [old Sec 10(10AA)], within the ₹25,00,000 statutory limit.
Leave Encashment Details
Section 19 [old Sec 10(10AA)]Calculate earned leave cash payout and statutory tax exemption under Section 19, Table Sl. No. 14 [old Sec 10(10AA)].
Govt employees enjoy complete tax exemption; non-govt employees are capped at ₹25,00,000.
Basic salary plus Dearness Allowance drawn in the month immediately preceding retirement.
Full completed years of service.
Unutilized earned leave days (statutory central limit is 300 days).
Tax Exemption Summary
Gross Leave Encashment
₹6,40,000
For 240 days at ₹2,667/day
Tax-Exempt Amount
₹6,40,000
100% Tax-Free [old Sec 10(10AA)]
Section 19, Table Sl. No. 13-14 [old Sec 10(10AA)] Benchmarks:
• Statutory Exemption Cap: ₹25,00,000 (CBDT Notification S.O. 2276(E))
• 10 Months Average Salary Limit: ₹8,00,000
• Earned Leave Entitlement Cap: ₹6,40,001
• Central/State Govt Employees: 100% Tax-Exempt under Sl. No. 13 at retirement
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How does the Leave Encashment Calculator work?
Leave encashment is the cash compensation paid by an employer for accumulated unavailed earned or privileged leaves at the time of retirement or resignation.
Central and State Government employees enjoy 100% tax exemption on leave encashment received at retirement under Section 10(10AA)(i).
For non-government and private sector employees, the tax exemption limit under Section 10(10AA)(ii) was officially increased from ₹3 Lakh to ₹25 Lakh by CBDT Notification S.O. 2276(E).
The tax-free amount for private staff is the least of: (1) Actual encashment received, (2) Statutory ceiling of ₹25,00,000, (3) 10 months average salary, (4) Cash equivalent of leave based on maximum 30 days per completed year of service.
Worked example (central government): a retiring employee with basic pay of ₹70,000 and DA at 63% has ₹1,14,100 a month in basic plus DA. With the maximum 300 days of earned leave, encashment is ₹1,14,100 × 300 ÷ 30 = ₹11,41,000, and all of it is tax-free. See the current DA with the DA Calculator.
Worked example (private employee): basic plus DA of ₹60,000 a month, 8 completed years and 120 days of leave on resignation gives ₹2,40,000 (₹60,000 × 120 ÷ 30). That is below every limit, so it is fully tax-free. On ₹3,00,000 a month with 300 days, the payout is ₹30,00,000: ₹25,00,000 is exempt and ₹5,00,000 is taxed as salary.
Your employer's policy decides the payout. Many private employers divide by 26 working days instead of 30, which pays more: ₹60,000 × 120 ÷ 26 is ₹2,76,923. The tax exemption, however, is always tested on a 30-day month and at most 30 days of leave for each completed year of service.
From 1 April 2026 the exemption sits in section 19 of the Income-tax Act, 2025 (it was section 10(10AA)), with the same ₹25 lakh limit, and it is allowed under both the new and old tax regimes. The ₹25 lakh is a lifetime limit across all your employers. Leave encashed while you are still in service is fully taxable. At retirement, also check your Gratuity and EPS pension.
Leave encashment by salary and leave balance
| Monthly basic + DA | 60 days | 120 days | 180 days | 240 days | 300 days |
|---|---|---|---|---|---|
| ₹30,000 | ₹60,000 | ₹1,20,000 | ₹1,80,000 | ₹2,40,000 | ₹3,00,000 |
| ₹50,000 | ₹1,00,000 | ₹2,00,000 | ₹3,00,000 | ₹4,00,000 | ₹5,00,000 |
| ₹75,000 | ₹1,50,000 | ₹3,00,000 | ₹4,50,000 | ₹6,00,000 | ₹7,50,000 |
| ₹1,00,000 | ₹2,00,000 | ₹4,00,000 | ₹6,00,000 | ₹8,00,000 | ₹10,00,000 |
| ₹1,50,000 | ₹3,00,000 | ₹6,00,000 | ₹9,00,000 | ₹12,00,000 | ₹15,00,000 |
Payout = monthly basic + DA × leave days ÷ 30. Government employees are fully exempt. For others, the exempt part is the least of the payout, ₹25 lakh, 10 months' average salary and 30 days' leave per year of service.
Leave Encashment Calculator formula
Leave Payout = (Leave Days Balance / Divisor) x Monthly Basic + DA
- Divisor
- = 30 days (standard tax calculation) or 26 days (working day basis)
- Govt Exemption
- = 100% tax-free under Section 10(10AA)(i)
- Private Exemption Cap
- = Least of 4 statutory limbs, capped at ₹25,00,000
Leave encashment availed during continuing employment is fully taxable in the year of receipt for all employees.
Leave Encashment Calculator: worked example
Private Sector Employee with 240 Days Accumulated Leave
- Last Drawn Monthly Basic + DA
- ₹80,000
- Per-Day Salary Basis (30 Days)
- ₹2,667
- Earned Leave Balance Encashed
- 240 Days
- Total Gross Leave Encashment
- ₹6,40,000
- Statutory Exemption Cap (Section 19 [old Sec 10(10AA)])
- ₹25,00,000
- 10 Months Average Salary Limit
- ₹8,00,000
- Tax-Exempt Leave Encashment
- ₹6,40,000
- Net Taxable Leave Encashment
- ₹0
Leave Encashment Calculator: frequently asked questions
What is the tax exemption limit on leave encashment for private employees?
Is leave encashment for government employees taxable?
Is leave encashment while in service tax-free?
How many maximum days of leave can be encashed at retirement?
Is leave encashment exemption available in the New Tax Regime?
What components of salary are included for leave encashment calculation?
How is leave encashment calculated?
How much leave encashment is tax-free for private employees?
How many days of earned leave can central government employees encash?
Further reading
Calculate tax on a ₹15 Lakh salary under New and Old Tax Regimes for FY 2026-27. Learn the exact breakeven deduction threshold and monthly take-home.
The 3-step HRA exemption formula under the Income-tax Rules, 2026: the 50% and 40% city rules, worked examples and your tax-free HRA.
Authoritative Sources
- Income Tax Department Section 10(10AA) Guidelines· verified 10 November 2026
- CBDT Notification S.O. 2276(E) on ₹25 Lakh Cap· verified 10 November 2026
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Reviewed by Pradipta Ray, MBA (Finance) · Updated