Leave Encashment Calculator

By ScaleSaathi Editorial · Updated 23 October 2026 · Facts checked against the Income Tax Department, CBDT Notification 31/2023 and PIB

How to use this leave encashment calculator

1. Pick the occasion — during service (fully taxable), retirement or resignation, or death (fully exempt).
2. Choose government or non-government — government staff get a full exemption at retirement; non-government use the four limits.
3. Enter average monthly basic, retirement DA and turnover commission for the last 10 months, plus the cash received.
4. Enter years of service, earned leave per year, and leave already taken. The tax formula caps entitlement at 30 days per year.
5. Optional: prior exemption claimed and a payroll ÷26 or ÷30 payout estimate. Print or copy the result.

How leave encashment tax exemption is calculated

For non-government employees at retirement or resignation, the exempt amount is the least of:

1. Leave encashment actually received;
2. Cash value of unutilised earned leave (credit at most 30 days × years of service with the current employer), using average monthly salary ÷ 30;
3. 10 months average salary;
4. Rs 25,00,000 minus any Section 10(10AA) exemption already claimed from earlier employers.

Average salary = basic + dearness allowance (if it counts for retirement benefits) + commission based on a fixed percentage of turnover.

Worked examples (FY 2026-27)

Non-government, 10 months binds: Average basic ₹50,000, received ₹9,00,000, 20 years, 30 EL/year, 100 days already taken. Unutilised = 500 days. Cash leave = ₹8,33,333. Ten months = ₹5,00,000. Ceiling = ₹25,00,000. Exempt ₹5,00,000. Taxable ₹4,00,000.

Cash leave binds: Average ₹80,000, received ₹5,00,000, 10 years, 30 EL/year, 200 days taken. Unutilised = 100. Cash leave = ₹2,66,666. Exempt ₹2,66,666.

During service: Same ₹9,00,000 received while still employed. Exempt ₹0. Fully taxable.

Government at retirement: Same ₹9,00,000. Exempt ₹9,00,000.

Rs 25 lakh ceiling (Notification 31/2023)

CBDT Notification No. 31/2023 (S.O. 2276(E), 24 May 2023) set the Section 10(10AA)(ii) limit at Rs 25,00,000 with effect from 1 April 2023. PIB PRID 1927265 announced the change from the earlier Rs 3 lakh ceiling. Enter exemptions already claimed so the remaining ceiling is correct.

Resignation vs retirement

The statute refers to retirement whether on superannuation or otherwise. The Income Tax Department exempt-income summary for Section 10(10AA) states relief at retirement/resignation for both government and non-government employees (subject to the four limits for non-government). Pages that say resignation is always fully taxable do not match that wording.

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Leave encashment calculator FAQ

What is leave encashment under Section 10(10AA)?

Leave encashment is cash paid for earned leave you did not take. Section 10(10AA) of the Income-tax Act sets when that cash is tax-free. During service it is fully taxable. At retirement (superannuation or otherwise, including resignation) government employees get a full exemption; non-government employees get the least of four limits, including the notified ceiling of Rs 25 lakh. On death, the amount paid to legal heirs is fully exempt.

Is leave encashment on resignation taxable?

Not automatically. The statute and the Income Tax Department exempt-income page cover retirement whether on superannuation or otherwise, and the department summarises government and non-government relief at retirement or resignation. Some websites wrongly say resignation is always fully taxable. This calculator follows the department wording. Your employer type and the four limits still decide how much is exempt.

What are the four exemption limits for non-government employees?

Exempt amount is the least of: (1) leave encashment actually received; (2) cash value of unutilised earned leave (at most 30 days credit per year of service with the current employer) using average monthly salary divided by 30; (3) 10 months average salary; (4) Rs 25,00,000 minus any leave-encashment exemption already claimed from earlier employers. Average salary means basic plus retirement DA plus turnover-based commission for the last 10 months before retirement.

What is the Rs 25 lakh ceiling and from when?

CBDT Notification No. 31/2023 (S.O. 2276(E), 24 May 2023) fixed the Section 10(10AA)(ii) ceiling at Rs 25,00,000 with effect from 1 April 2023. PIB press release PRID 1927265 announced the hike from the earlier Rs 3 lakh limit. Enter any exemption already claimed so the calculator uses the remaining ceiling.

Does the exemption apply under the new tax regime?

Section 10(10AA) leave-encashment exemption is a Section 10 exemption from salary income. It is not the same as HRA (Section 10(13A)), which is old-regime only. Treat leave-encashment exemption as available when the statutory conditions are met; confirm on your Form 16 and with a tax professional for your regime choice.

Why does the tax formula use divide-by-30 while payroll may use 26?

For the tax cash-equivalent limit, 30 days equal one month of leave salary, so unutilised days times average monthly salary divided by 30. Employers sometimes pay full-and-final leave using a 26-day or 30-day divisor as a policy choice. This tool shows a separate payout estimate with your chosen divisor so F and F maths is not confused with the tax limits.

What counts as salary for leave encashment exemption?

As on the Income Tax Department income-from-salary page: basic pay plus dearness allowance to the extent it forms part of retirement benefits plus commission based on a fixed percentage of turnover. Other allowances, bonus and perquisites are left out of this average.

Is leave encashment during service taxable?

Yes. The department table states leave encashment received during the period of service is fully taxable as salary. Encash at year-end while still employed does not get the retirement exemption.

What if the employee dies in service?

Leave encashment paid on the death of the employee is fully exempt according to the Income Tax Department leave-encashment table and the Section 10(10AA) summary on the exempt-income page.

Do government employees get a full exemption?

Yes, for unutilised earned leave encashed at retirement (superannuation or otherwise). During service, even government employees are taxed on leave encashment. Statutory corporation staff are not automatically treated as government employees for this clause — check your service rules and Form 16.

Is this calculator free, and is my data stored?

Yes, it is free. All numbers stay in your browser. Nothing is uploaded to ScaleSaathi servers. There is no sign-up.

How is this different from Figment, SalaryExit or Avani leave tools?

We add occasion modes (during service, retirement or resignation, death), show the four limits side by side with a least highlight, separate payroll divide-by-26 or 30 from tax divide-by-30, correct the common resignation myth using department wording, cite Notification 31/2023 and PIB with dates, and offer print and copy with no product login or affiliate box.

Sources (checked 23 October 2026)

• Income Tax Department — Income from Salary (Leave Encashment table)
• Income Tax Department — Exempt Income (Section 10(10AA) summary)
• CBDT Notification No. 31/2023, S.O. 2276(E), 24 May 2023 (Rs 25 lakh ceiling w.e.f. 1 April 2023)
• PIB Press Release PRID 1927265

This calculator is for planning only. It is not tax advice. Your Form 16 and a qualified tax professional decide what you can claim. Employer leave rules and full-and-final payout maths can differ from the tax limits shown here.