Leave Encashment Calculator.
Leave encashment is basic salary plus dearness allowance, divided by 30 (or 26), multiplied by the unused earned leave days. Enter those figures and this calculator gives the amount and, for an exit from a private-sector job in India, splits it into the exempt and taxable parts using the four statutory limits, including the ₹25 lakh cap.
An estimate based on the exemption for leave encashment in section 10(10AA) of the Income-tax Act, 1961 and the ₹25 lakh limit notified in 2023. Tax law changes; confirm the figures with your payroll team or a tax adviser. Nothing is sent to a server.
Leave Encashment Calculator is a free online tool from Neweb (neweb.ai) for small businesses, with no sign-up. Leave encashment is basic salary plus dearness allowance, divided by 30 (or 26), multiplied by the unused earned leave days. Enter those figures and this calculator gives the amount and, for an exit from a private-sector job in India, splits it into the exempt and taxable parts using the four statutory limits, including the ₹25 lakh cap.
| Cost | Free, no account, no sign-up |
|---|---|
| Built for | small businesses, freelancers and sole proprietors |
| Made by | Neweb, the AI website builder and online presence manager (free plan; paid plans from $9/month billed yearly) |
Facts checked October 2026.
What you'll get.
A real example of what this tool produces. Run it above with your own inputs.
Most Indian employers let employees carry forward earned leave (also called privilege leave) and pay for the unused balance when they resign or retire, and some allow part of it to be cashed in every year. That payment is leave encashment. The amount is simple arithmetic: one day of basic pay plus dearness allowance, multiplied by the unused days. The tax on it is where people get confused, because the answer depends on when you encash and who you work for.
This calculator does both parts. It works out the encashment with a divisor of 30 or 26, whichever your company policy uses. Then it applies the tax rule for your situation: fully taxable if encashed while you are still employed, fully exempt for central and state government employees at retirement, and for everyone else at exit, exempt up to the lowest of four limits. It shows all four so you can see which one applies to you.
The tool is free, needs no sign-up and runs in your browser. It comes from Neweb, the AI website builder for small businesses, which has a free plan and paid plans from $9/month billed yearly ($19 month-to-month). If you run payroll for a small team, the other HR calculators on this site cover gratuity, notice pay and take-home salary.
How to use the leave encashment calculator
Enter your monthly basic salary plus DA and the number of unused earned leave days from your leave statement.
Choose the divisor your employer uses for a day of pay: 30 is most common, some policies use 26.
Select when the leave is encashed: at exit from a private-sector job, during service, or at retirement from government service.
For an exit, enter your completed years of service and, if they apply, your 10-month average salary, an entitlement above 30 days and any exemption claimed before.
Click Calculate to see the amount, the exempt portion, the taxable portion and the four limits.
Why this matters for your business
It is a significant part of a final settlement. For a long-serving employee, unused leave can be worth several months of basic pay, and employees check it line by line.
The exemption is easy to get wrong. Employers deduct tax on the taxable part, and an employee who changes jobs has to keep track of how much of the lifetime limit has been used.
When to use a leave encashment calculator
Use it when you resign or retire and want to check your full and final settlement, when your company offers annual encashment and you want to know the tax cost, and, as an employer, when you prepare a settlement for someone who is leaving. Pair it with the gratuity calculator and the notice period calculator for the other parts of the settlement.
Tips for better results
- Use basic plus DA, not gross or CTC. Allowances such as HRA are not part of the calculation unless your policy says so.
- Check your company leave policy for the maximum days that can be encashed; many cap the carry-forward balance.
- Only earned or privilege leave is normally encashable. Casual and sick leave usually lapse.
- If you have claimed the exemption with a previous employer, tell your current payroll team so the lifetime limit is applied correctly.
- If encashment is taxable and relates to several years, ask your tax adviser whether relief under section 89 is available.
Example
A real-world walkthrough
Meera resigns after 8 years with a private company. Her basic salary plus DA is ₹60,000 a month and she has 45 days of earned leave left. Her company divides by 30, so one day of pay is ₹2,000 and the encashment is ₹90,000.
For the exemption, the calculator compares four figures: the ₹90,000 received, 10 months of average salary at ₹6,00,000, the cash value of her 45 days at ₹90,000 (well within 30 days for each of her 8 years), and the ₹25,00,000 statutory limit. The lowest is ₹90,000, so the whole amount is exempt and nothing is taxable. Had her company divided by 26, she would receive ₹1,03,846.15, the exemption would still be ₹90,000, and ₹13,846.15 would be taxed as salary.
Frequently asked questions
How is leave encashment calculated?
Leave encashment = (basic salary + dearness allowance) ÷ 30 × number of unused earned leave days. Some employers divide by 26 instead of 30, which gives a higher figure. With basic plus DA of ₹60,000 and 45 unused days, the encashment is ₹60,000 ÷ 30 × 45 = ₹90,000.
Is leave encashment taxable?
It depends on when you receive it. Encashment while you are still in service is fully taxable as salary. Encashment at retirement is fully exempt for central and state government employees. For other employees, encashment at retirement or resignation is exempt up to the lowest of four limits and taxable above that.
What are the four limits for the leave encashment exemption?
For non-government employees at exit, the exempt amount is the least of: the leave encashment actually received; 10 months of average salary; the cash equivalent of unused leave, counting at most 30 days of leave for each completed year of service; and the limit notified by the government, which is ₹25,00,000. Average salary means basic plus DA averaged over the 10 months before you leave.
What is the ₹25 lakh limit?
The government raised the maximum exemption for non-government employees from ₹3,00,000 to ₹25,00,000 with effect from 1 April 2023. It is an aggregate limit: exemptions you claimed on leave encashment from earlier employers count towards it. Enter earlier claims in the last field and the calculator reduces the limit accordingly.
Which salary is used: basic, gross or CTC?
Basic salary plus dearness allowance, and commission if it is a fixed percentage of turnover. HRA, special allowance, bonus and employer contributions are left out, both for the usual company calculation and for the tax exemption test. Your company policy can be more generous on the payment, but the exemption test uses this definition.
Which section of the law covers this?
The exemption has long been in section 10(10AA) of the Income-tax Act, 1961. India has enacted a new Income-tax Act, 2025 that renumbers provisions for later tax years, so the section reference on your tax documents may differ depending on the year. The four-limit test described here is the established rule; confirm the current reference and limits with your payroll team or a tax adviser.
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