Leave encashment calculator: what will you be paid, and how much is tax-free?

The usual formula is: leave encashment = (monthly Basic + DA ÷ 30) × unused leave days. Some employers divide by 26, the working days in a month, which gives a higher daily rate. Your employer's leave policy decides the divisor, which kinds of leave can be encashed (often only earned or privilege leave) and any cap on the days you can encash, and for some staff state Shops & Establishments Acts or factory law also set rules. For example, ₹50,000 Basic + DA and 60 unused days at ÷30 comes to ₹1,00,000. This calculator works it out either way, but it's an estimate: your full and final settlement shows the real figure.

It depends on when you're paid and who you work for. Leave encashed while you're still employed is fully taxable as salary. When a non-government employee retires or resigns, it's tax-free up to the lowest of four limits under section 10(10AA)(ii), and anything above that is taxed as salary. Central and State Government employees pay no tax on it when they retire, and leave encashment paid to the legal heirs of an employee who dies in service isn't taxed either. From 1 April 2026 the same rules sit in section 19 of the Income-tax Act, 2025.

For a non-government employee who retires or resigns, the tax-free part is the lowest of: (1) the leave encashment actually received; (2) ₹25,00,000; (3) 10 × your average monthly salary over the 10 months before you leave; and (4) the cash value of your leave balance, counting no more than 30 days of leave for each completed year of service. "Salary" here means Basic, plus DA where your terms of employment count it, plus any commission fixed as a percentage of turnover. HRA and other allowances don't count. The ₹25 lakh figure applies from 1 April 2023 (CBDT Notification No. 31/2023). Before that it was ₹3 lakh, a limit set in 2002.

Lifetime. It's one limit across every employer you ever work for. If you're paid leave encashment by more than one employer in the same year, those payments share the ₹25 lakh, and anything you claimed as exempt in earlier years comes off it. So if ₹10 lakh was tax-free when you left a previous job, at most ₹15 lakh more can ever be. Enter any earlier claim in the calculator and it reduces the limit for you.

Yes, in full. Leave you encash while you're still in the job, whether at year-end or because your policy pays out leave above a carry-forward cap, is taxed as part of your salary in the year you're paid. There's no exemption, for government and private-sector employees alike; the exemption only applies when you leave. If one payment covers several years and pushes you into a higher slab, you may be able to claim relief for arrears under section 89 (section 157 of the Income-tax Act, 2025).

It depends on your leave policy and on which laws cover your job. Many policies encash only earned or privilege leave, not casual or sick leave, cap how many days can be encashed, or let leave above a carry-forward limit lapse, and for most office roles the policy and your employment contract decide. Some laws set a floor for the staff they cover: factory law (the Factories Act, 1948, now replaced by the OSH Code, 2020) requires wages in lieu of unused leave when a worker leaves, and each state's Shops & Establishments Act has its own rules. These often exclude managerial and supervisory roles. Ask HR for the leave policy in writing, and if you think your state's law entitles you to more, your state labour department is the place to raise it.