Use our free Leave Encashment Calculator for India to compute the taxable and tax-exempt value of your encashed leaves. Know how much you can earn from unused leaves based on your basic salary, DA, and leave balance. Accurate, fast, and compliant with Indian tax laws!
Leave Encashment Calculator
User Guide: How to Use the Leave Encashment Calculator
- Enter Basic Salary – Input your monthly basic salary (excluding allowances).
- Enter Dearness Allowance (DA) – If applicable, add your DA component.
- Input Leave Balance – Enter the number of unused leaves eligible for encashment.
- Select Employment Type – Choose between government or private sector (tax rules vary).
- Click Calculate – Instantly view your leave encashment value, taxable amount, and exemption (if any).
Key Features of the Leave Encashment Calculator
- Tax-Compliant Calculations – Follows Section 10(10AA) of the Income Tax Act for exemptions.
- Government & Private Sector Modes – Different rules for each employment type.
- Real-Time Results – Displays taxable and tax-free components.
- Mobile-Friendly – Works seamlessly on all devices.
- No Registration Needed – Free and instant calculations.
Benefits of Using the Leave Encashment Calculator
- Financial Planning – Estimate how much you’ll earn from unused leaves.
- Tax Savings – Understand exemptions under Indian tax laws.
- Quick & Accurate – Eliminates manual errors in leave encashment calculations.
- HR & Employee Use – Useful for both employees and HR professionals.
Leave Encashment Calculation Policy (India)
1. Formula for Leave Encashment Calculation
The encashment value is calculated as:
Leave Encashment = (Basic Salary + DA) / 30 × Number of Unused Leaves
2. Tax Exemption Rules (Section 10(10AA))
- Government Employees: Fully exempt from tax.
- Private Sector Employees: The least of the following is tax-free:
- ₹3,00,000 (overall lifetime limit)
- Cash equivalent of 10 months’ leave salary (based on last drawn salary)
- Leave encashment actually received
- Unused leave (max 30 days/year) × Average salary
3. Example Calculation
- Basic Salary: ₹50,000
- DA: ₹10,000
- Unused Leaves: 20
- Calculation:
- Per Day Salary = (₹50,000 + ₹10,000) / 30 = ₹2,000
- Encashment Value = ₹2,000 × 20 = ₹40,000
- Taxable Amount: If total encashment exceeds ₹3 lakh (lifetime), the excess is taxable.
4. Important Conditions
- Only earned leaves (not sick/casual leaves) are eligible.
- Maximum 30 days/year leave accumulation is considered.
- Encashment during service is taxable; at retirement, exemptions apply.
Conclusion
Our Leave Encashment Calculator helps Indian employees and employers accurately compute the value of unused leaves while considering tax exemptions. Whether you’re in government or private sector employment, this tool ensures compliance with Indian tax laws and aids in financial planning.
FAQ
Is leave encashment taxable in India?
Leave encashment is tax-free up to ₹3 lakh (lifetime) for private employees under Section 10(10AA). Government employees enjoy full exemption.
How is leave encashment calculated?
Leave encashment = (Basic Salary + DA) / 30 × Number of unused leaves. Tax exemption rules apply based on employment type.
What is the maximum tax-free leave encashment limit?
₹3,00,000 is the lifetime tax exemption limit for private sector employees. Government employees have no such limit.
Can I encash all my unused leaves?
Only earned leaves (not sick/casual) can be encashed, subject to company policy and a maximum of 30 days/year accumulation.
Is leave encashment better during service or at retirement?
Encashment at retirement is tax-exempt (up to ₹3 lakh), whereas during service, it is fully taxable.
How many leaves can be encashed per year?
Typically, up to 30 earned leaves per year can be accumulated and encashed, subject to employer policy.
Does leave encashment include bonuses and allowances?
No, only basic salary and DA are considered for leave encashment calculations.
Is leave encashment applicable for resigned employees?
Yes, but tax exemption rules still apply (₹3 lakh lifetime limit for private employees).
What if my company does not allow leave encashment?
Leave encashment depends on company policy. If not allowed, unused leaves may lapse or be carried forward.
How can I check my leave encashment eligibility?
Refer to your company’s HR policy or use our Leave Encashment Calculator to estimate your entitlement.