Leave encashment calculator (estimate)
Estimate gross leave encashment before tax. Pick a day-basis (26 vs 30) to match how your employer approximates per-day pay from monthly Basic+DA.
Reviewed July 2026 · FY 2026–27 (AY 2027–28) tax slabs in engine · Methodology
Explicit modeling choice
We compute a gross payout estimate only. Net pay after tax/ESI/PT and employer-specific caps are not included.
Changing the day basis can materially change results — pick what matches your payslip policy best (see accuracy card).
Required inputs
- Basic + DA (monthly, ₹)
- Unused leave days eligible for encashment
- Day basis (26 or 30) for per-day rate
Assumptions used by this estimate
- Gross encashment = (Basic+DA monthly ÷ day basis) × unused leave days.
- Day basis 26 is common in Indian payroll "per day" calculations; 30 is a calendar-day style alternative.
- Tax exemptions (e.g., Section 10(10AA) where applicable) are not calculated here.
- Employers may use Basic-only, caps, or rounding rules not modeled.
Worked example (same engine as live calculator)
Engine snapshot: Basic+DA ₹52,000/month, 8 days, 26-day basis → per-day ₹2,000 → encashment ₹16,000 gross (before tax).
FAQ
Why two day bases?
Companies differ. If you don't know, compare both and treat the range as uncertainty, not precision.
Leave encashment in India: how the per-day rate and tax rules work
Leave encashment is the cash equivalent you receive for unused earned leave (EL) when you leave a job or, in some companies, at the employer's discretion during service. Private-sector employees typically accumulate earned leave at a rate defined by their company's leave policy, often 1–1.5 days per month (12–18 days per year), with a maximum carryforward cap set by the employer.
The per-day rate for encashment is calculated from your Basic + DA (or "basic salary" as defined in the leave policy), divided by either 26 or 30. The 26-day denominator treats a month as 26 working days — a convention common in the Payment of Gratuity Act and some employer policies. The 30-day denominator uses the calendar month. Whichever method your employer uses determines the per-day value of each encashed leave day. This calculator lets you choose the denominator to match your company's policy.
Tax treatment differs by employment type. Central and state government employees receive a specific exemption for leave encashment at retirement, with defined limits under Section 10(10AA) of the Income Tax Act. For private-sector employees, leave encashment received at the time of retirement or resignation is exempt up to certain limits and subject to specific conditions. Encashment during service (while still employed) is generally fully taxable as salary. Given the tax complexity, consult a chartered accountant for significant leave encashment payouts — especially at the time of leaving or retirement.
In your final settlement, leave encashment appears alongside gratuity, last month salary, and notice pay. It is one of the more negotiable components — some companies cap the leave balance that can be encashed, or require you to take leave instead. Understanding the per-day value helps you compare these options.
- Per-day rate = (Monthly Basic+DA) ÷ 26 (or ÷ 30, per employer policy).
- Only earned/privilege leave is typically encashable — casual and sick leave often are not.
- Encashment during service is fully taxable; at separation, exemptions may apply.
- Government employees have distinct exemption rules under Section 10(10AA).
- Final settlement: leave encashment + gratuity + last salary − notice recovery = net FnF.
Related guides
Spotted a wrong number or confusing label? Report a calculation error — every report gets checked against the engine.
Leave encashment: which types of leave can be paid out
Indian employment law and company policies recognize several types of leave. Not all of them can be encashed — the rules differ by leave type and by the circumstances of separation (resignation vs retirement vs death in service).
- Earned Leave / Privilege Leave (PL/EL): This is the most commonly encashable leave type. It accrues at a rate specified in the company policy (commonly 1.25 to 1.5 days per month). Most companies allow encashment of accumulated but unused PL at the time of separation. Some allow partial encashment during employment.
- Casual Leave (CL): Typically not carried forward and not encashable. CL not used in the calendar year lapses.
- Sick Leave (SL): Usually not encashable; some government organizations allow limited encashment on retirement.
- Compensatory Off (Comp Off): May or may not be encashable depending on company policy. Usually time-bound — unused comp offs lapse after a defined period.
How leave encashment is calculated
The calculation uses daily salary derived from Basic + Dearness Allowance (not gross):
Encashment = (Basic + DA per month ÷ 26) × Number of Earned Leave Days
The divisor of 26 represents working days in a month under Indian labor convention. Some companies use 30 days instead, which produces a slightly lower per-day figure.
Example: Basic+DA ₹40,000/month, 25 accumulated earned leave days. Encashment = (₹40,000 ÷ 26) × 25 = ₹38,461.
Tax treatment: retirement vs resignation matters significantly
The tax treatment of leave encashment differs sharply depending on how you leave the organization:
- On retirement or death in service: Government employees get full exemption. Private sector employees can claim exemption up to ₹25,00,000 (₹25 lakh) — this limit was revised significantly upward in 2023 from the earlier ₹3 lakh limit. The exemption applies to Earned/Privilege Leave encashment only.
- During employment (in-service encashment): Fully taxable as salary income in the year of receipt. No exemption available.
- On resignation: Fully taxable as salary in the year of receipt. The ₹25 lakh exemption only applies at retirement. This is a significant financial difference and often not well understood by employees planning exits.
Leave encashment vs using the leave before quitting
Many employees face a choice near resignation: take the remaining earned leave before the last day, or receive encashment. The financial math often favors using leave before quitting:
- Using earned leave as paid time off means your full gross salary (including all allowances) continues to be paid — encashment is computed only on Basic+DA.
- Using leave extends your effective last date, which can help with notice period compliance and PF/gratuity calculation in some cases.
- Encashment on resignation is taxable as salary with no exemption — whereas simply receiving your normal salary while on earned leave is taxed the same way but uses the full gross computation.