Leave Encashment
Leave Encashment Calculator
Our free leave encashment calculator helps you determine the exact amount you'll receive for your unused leaves and calculates the tax implications. Whether you're a government employee or private sector worker, get accurate calculations for leave encashment during service or at retirement.
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Leave Encashment Calculation Results
Calculation Details
Financial Breakdown
Calculation Formula
Daily Salary: Average Salary ÷ 30 = ₹30,000 ÷ 30 = ₹0
Max Eligible Leaves: Years of Service × 30 = 5 × 30 = 150 days
Encashable Leaves: Minimum of (Unused Leaves, Max Eligible) = Minimum of (75, 150) = 0 days
Total Amount: Daily Salary × Encashable Leaves = ₹0 × 0 = ₹0
Tax Calculation for Private Employee at retirement: Exemption = Minimum of (Statutory Limit, Leave Salary Received, 10 Months' Salary, Cash Equivalent) = Minimum of (₹25,00,000, ₹0, ₹3,00,000, ₹0) = ₹0
• Statutory Limit: ₹25,00,000
• Leave Salary Received: Average Salary ÷ 30 × Encashable Leaves = ₹30,000 ÷ 30 × 0 = ₹0
• 10 Months' Salary: Average Salary × 10 = ₹30,000 × 10 = ₹3,00,000
• Cash Equivalent: Average Salary ÷ 30 × Encashable Leaves = ₹30,000 ÷ 30 × 0 = ₹0
Taxable Amount: Total Amount - Exemption = ₹0 - ₹0 = ₹0
Step-by-Step Guide
How to calculate leave encashment and tax liability?
Calculate your leave encashment amount and tax implications in 4 simple steps:
Select Employee Type
Choose whether you are a government or private employee, as tax implications vary significantly between the two categories.
Choose Encashment Timing
Specify if you're encashing leaves during service or at retirement, which affects your tax exemption eligibility.
Enter Service Details
Input your years of service, average salary, unused leaves, and total annual leave entitlement for accurate calculations.
View Tax Breakdown
Get detailed calculations showing total encashment amount, tax exemption, and taxable portion based on current income tax rules.
Frequently asked questions
Visit our full FAQ page or get in touch with Frederic, our Customer Support Officer and Founder of PayrollRabbit.
- Leave encashment is the monetary compensation an employee receives for unused leaves that were not utilized during their employment. This payment is typically made during resignation, retirement, or as part of company policy during service. The amount is calculated based on the employee's basic salary plus dearness allowance and the number of unused leaves eligible for encashment.
- The Leave Encashment Calculator is a free tool developed by PayrollRabbit to calculate your leave encashment amount and determine its tax implications. It helps both government and private employees understand how much they can receive for unused leaves and calculates the exemption and taxable portions based on current income tax rules under Section 10(10AA).
- Leave encashment is calculated using the formula: (Basic Salary + Dearness Allowance) ÷ 30 × Number of Encashable Leaves. The maximum encashable leaves cannot exceed 30 days per year of service or 300 days total. For example, if your monthly basic salary is ₹50,000 and you have 100 unused leaves, your encashment would be ₹50,000 ÷ 30 × 100 = ₹1,66,667.
- Government employees receive full tax exemption on leave encashment at retirement under Section 10(10AA)(i). Private employees get limited exemption up to ₹25,00,000 at retirement under Section 10(10AA)(ii). The exemption for private employees is the least of: statutory limit (₹25,00,000), leave salary received, 10 months' average salary, or cash equivalent based on last 10 months' salary. Leave encashment during service is generally taxable for both categories.
- Commonly encashable leaves include: Earned Leave/Privilege Leave (usually eligible after completion of service period), Casual Leaves (varies by company policy), unused Sick Leave (short-term medical leaves may be encashed), Sabbatical Leave (paid leave for skill development), and Holiday Leaves (organization-declared holidays). However, Maternity Leave beyond the standard paid period and long-term medical leaves are generally not encashable. Encashment rules vary significantly across organizations, so check your company's leave policy for specific eligibility criteria.
- For government employees, there is no limit on leave encashment exemption at retirement - it's fully exempt under Section 10(10AA)(i). For private employees, the maximum exemption limit is ₹25,00,000 under Section 10(10AA)(ii). Additionally, earned leave encashment cannot exceed 30 days for every year of actual service rendered. The exemption calculation for private employees considers the minimum of four factors: statutory limit, actual leave salary received, 10 months' average salary, and cash equivalent of unavailed leaves.
What is Annual Leave Encashment?
What is the Leave Encashment Calculator?
How is Leave Encashment calculated?
What is the difference between government and private employee leave encashment taxation?
Which types of leaves are eligible for encashment?
What is the maximum limit for leave encashment exemption?
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