Leave Encashment Tax Calculator
How much leave encashment on retirement or resignation is tax-free, by the least-of-four rule with the ₹25 lakh limit for non-government employees.
Result
Exempt from tax: ₹10,00,000Estimate
Government employees’ leave encashment on retirement is fully exempt. Encashment while in service is taxed as salary.
- Taxable
- ₹2,00,000Estimate
- Limited by
- the cash value of leave at credit
- Cash value of leave at credit
- ₹10,00,000Estimate
https://calcgallery.com/income-tax/leave-encashment-calculator/
An estimate from the published rates for the tax year shown, for the situation described on this page. It is not a tax return or tax advice. Rules change with each budget, and your own circumstances can change the answer. Check it against your payslip and the tax authority’s own calculator, and confirm anything that matters with a qualified tax adviser. Read the full disclaimer
How to use the Leave Encashment Tax Calculator
- Enter your average monthly salary over the last ten months of service, counting basic pay and dearness allowance that counts for retirement benefits.
- Enter the earned leave days at credit, your completed years of service and the encashment you received.
- Add any leave encashment exemption you claimed from earlier employers.
- Read the exempt amount, the taxable amount and which limit set it.
The four limits
The Income-tax Act, 2025 exempts the smallest of these:
- The cash value of your earned leave at credit, valued at your average salary, counting no more than 30 days for each completed year of service.
- Ten times your average monthly salary over the ten months before you left.
- ₹25 lakh, less any leave encashment exemption you claimed before.
- The leave encashment you actually received.
The rest is taxed as salary.
A worked case
You retire after 25 years with 350 days of leave at credit, an average salary of ₹1,00,000 a month, and receive ₹12 lakh. The leave counts in full because 350 days is less than 30 × 25 = 750. Its cash value is 350 × ₹1,00,000 ÷ 30 = ₹11,66,667. Ten months’ salary is ₹10 lakh, which is the smallest limit, so ₹10 lakh is exempt and ₹2 lakh is taxed.
Points to check
Salary here means basic pay plus dearness allowance that counts for retirement benefits, plus any commission fixed as a percentage of turnover. The page values a day’s salary as a thirtieth of a month’s. Your employer’s leave rules may count leave in a different way, so check the days on your final settlement.
With your numbers
- The exemption is the smallest of four amounts; leave counts at most 30 days a year of service
Quick reference
Government employees’ leave encashment on retirement is fully exempt. Encashment while in service is taxed as salary.
| Example | Exempt from tax |
|---|---|
| ₹1 lakh salary, ₹12 lakh received | ₹10,00,000 |
| ₹4 lakh salary, ₹40 lakh received | ₹25,00,000 |
| ₹4 lakh salary, ₹5 lakh exempt earlier | ₹20,00,000 |
| ₹50,000 salary, 150 days, 5 years | ₹2,50,000 |
| ₹80,000 salary, 240 days | ₹6,40,000 |
| ₹2 lakh salary, 300 days | ₹20,00,000 |
Where the numbers come from
The fixed figures this calculator relies on, and the published source each one was checked against. How the calculators are built and checked
2 sources
CBDT, Notification 31/2023 (24-05-2023), https://www.incometaxindia.gov.in/w/increased-limit-for-tax-exemption-on-leave-encashment-for-non-government-salaried-employees-notified-1, continued by s.536(2)(j)
Used for
- Leave encashment exemption limit for non-government employees.
Income-tax Act, 2025 as amended by the Finance Act 2026, https://www.incometaxindia.gov.in/documents/d/guest/income_tax_act_2025_as_amended_by_fa_act_2026-pdf, s.19(1) Table Sl. 14
Used for
- Earned leave counted at most this many days for each year of service.
- Average salary over this many months before retirement.
Common questions about the Leave Encashment Tax Calculator
- How much leave encashment is tax-free?
- For a non-government employee who retires or resigns, the least of four amounts: the cash value of the earned leave at credit (counting at most 30 days for each completed year), ten months of average salary, ₹25 lakh less any exemption claimed before, and the amount actually received.
- Is leave encashment for government employees taxable?
- No. Central and state government employees get a full exemption on leave encashment at retirement. This page is for other employees.
- What about leave encashed while still working?
- It is fully taxable as salary in the year you receive it. The exemption only applies on retirement or on leaving the job.
- Is the ₹25 lakh limit per job?
- No, it is a lifetime limit. If you claimed an exemption when you left an earlier job, the limit for this one is reduced by that amount.
- Can I claim it in the new tax regime?
- Yes. The leave encashment exemption is available whichever regime you choose.