Leave Encashment Calculator
Work out what your unused earned leave is worth when you resign or retire.
Unused earned leave usually converts to cash when you leave a job — but how much depends on three things your employer decides: whether encashment is on basic or gross, whether a month counts as 30 days or 26, and whether there is a cap on the days paid. This calculator applies all three and then works out the tax.
Leave and salary details
Result
Fill in the fields above and your result will appear here.
What the Leave Encashment Calculator does
Indian employers typically credit earned leave, also called privilege leave, at 15 to 30 days a year. It accumulates up to a policy limit and is paid out at exit. Casual leave and sick leave almost never qualify for encashment.
The tax treatment differs sharply by sector and occasion. Government employees receive the amount tax-free at retirement. Private-sector employees get a limited exemption at resignation or retirement, and none at all if they encash while still employed.
How to use this tool
- Enter your unused earned leave balance from your latest payslip or HR portal.
- Choose whether your policy encashes on Basic + DA or on gross salary, and enter that monthly figure.
- Pick the divisor your employer uses — 30 calendar days is standard, 26 working days pays more.
- Enter any policy cap on encashable days, or leave it at zero if there is none.
- Say whether you are encashing at exit or while still employed, since the tax treatment is completely different.
Formula and method
Encashment = (Basic + DA or Gross) ÷ 30 × Encashable leave days
Exemption on resignation or retirement (private sector) is the LEAST of:
• the amount actually received
• ten months' average salary
• the remaining lifetime limit under Section 10(10AA)
Government employees: fully exempt.
Encashed while in service: fully taxable.
Worked example
Example: 30 days of leave, Basic + DA of ₹40,000
| Daily rate (₹40,000 ÷ 30) | ₹1,333 |
| 30 days encashed | ₹40,000 |
| Exempt (least of the three tests) | ₹40,000 |
| Taxable | ₹0 |
On the 26-day divisor the same 30 days would pay ₹46,154 — about 15% more for exactly the same leave balance. It is worth checking which basis your policy uses.
What your result means
The gross amount is added to your full and final settlement, not paid separately.
The taxable portion is added to your salary income for the year and taxed at your slab rate. For most people leaving with a normal leave balance, the exemption covers the whole amount.
If the calculator shows days lapsing because of a policy cap, consider taking that leave before your last working day instead — though note that leave taken during notice often does not count as notice served.
Important considerations
- Only earned or privilege leave is normally encashable. Confirm which bucket your balance sits in before counting on it.
- Many policies cap accumulation itself, so leave beyond the cap may already have lapsed each year rather than at exit.
- The lifetime exemption limit applies across all employers in your career, not per job. Track what you have already used.
- Encashing leave while employed is fully taxable and is usually the least efficient way to convert leave to cash.
- If your employer refuses encashment entirely, check your appointment letter and the applicable shops and establishments or factories legislation for your state — several mandate encashment of accumulated leave at exit.
Limitations of this tool
- The ten-months' average salary test uses your current monthly figure rather than the statutory ten-month average of the last period, which can differ if your salary changed recently.
- It does not model leave that lapses annually under a carry-forward cap, nor employer-specific rules on encashing leave at a rate different from your last drawn salary.
Frequently asked questions
Is leave encashment taxable in India?
It depends. Government employees receive it tax-free on retirement. Private-sector employees get a limited exemption under Section 10(10AA) at resignation or retirement, computed as the least of several tests. Encashment while still in service is fully taxable in every case.
Is encashment calculated on basic or gross salary?
Most private employers use Basic + DA, which produces a substantially lower payout than gross. Your leave policy or appointment letter specifies it — this is one of the most common sources of disagreement in a settlement.
Can my employer refuse to encash my leave?
Employer policy governs how much is encashable, and caps are lawful. However, several state shops and establishments Acts require accumulated earned leave to be paid at the end of employment. If you are refused entirely, check your state's rules.
Does casual leave get encashed?
Almost never. Casual and sick leave are use-or-lose in most Indian organisations. Only earned or privilege leave accumulates and converts to cash.