Leave Encashment Calculator
Calculate what unused leave is worth in cash and how much of it is tax-free. For a non-government employee leaving a job the exemption is the least of four figures, capped at ₹25 lakh across a whole career.
Free · No sign-up · Nothing leaves your browser · Figures reviewed 22 September 2026
Your details
Follow whatever your leave policy says. A 26-day divisor produces a higher daily rate.
Leave encashment
₹50,000
30 days at ₹1,666.67 a day, calculated on a 30-day month.
The payout
- Monthly basic + DA
- ₹50,000
- Per dayMonthly wages ÷ 30
- ₹1,666.67
- Days encashed
- 30 days
- Gross encashment
- ₹50,000
Tax — the least of four
- Actual encashment
- ₹50,000
- Leave × average monthly salaryLeave credited at no more than 30 days a year of service
- ₹50,000
- 10 months' average salary
- ₹5,00,000
- Statutory cap
- ₹25,00,000
- Exempt
- ₹50,000
- Taxable as salary
- ₹0
The exemption is the lowest of these, and it is a lifetime limit across every employer, not a per-job one.
Only leave accrued at up to 30 days a year of service counts towards the second limb. A policy that credits more does not enlarge the exemption.
The exemption survives in both the old and the new tax regime.
This is an estimate for planning, not tax or legal advice. Statutory rates and thresholds are date-effective and change by notification — confirm against the current one before you run payroll or file.
Encashing leave is straightforward arithmetic — a day's wages times the number of days — and a much less straightforward tax question. The answer depends on whether you are leaving, whether you work for the government, and on a four-way test where the smallest number wins.
Encashment while still employed is fully taxable, whoever you work for. The exemption only exists on leaving.
The four-way test
For a non-government employee leaving a job, the exempt amount is the least of: the actual encashment; the cash equivalent of unutilised leave calculated on average monthly salary; ten months' average salary; and ₹25 lakh.
Only leave accrued at up to 30 days for each year of service counts towards the second limb. A generous policy that credits 45 days a year does not enlarge the exemption — it just means more of the payout is taxable.
The ₹25 lakh is a lifetime limit across every employer you have ever had, not a per-job one. Someone who used part of it at a previous exit has less available at the next.
Where the exemption does not apply
Encashment taken while still in service is fully taxable as salary, and is taxed in the month it is paid at your average rate for the year.
For central and state government employees, encashment on retirement is fully exempt and the four-way test does not apply at all.
The exemption survives in both the old and the new tax regime, which is unusual — most salary exemptions do not.
Frequently asked questions
- Is leave encashment taxable?
- It depends. On retirement, fully exempt for government employees. On leaving for everyone else, exempt up to the least of four limits with a ₹25 lakh lifetime cap. While still employed, fully taxable as salary for everyone.
- What is the leave encashment exemption limit?
- ₹25 lakh for non-government employees, and it is a lifetime limit across all employers rather than a limit per job.
- How is a day's leave valued?
- Monthly basic + DA divided by the number of days your policy uses — 30 for calendar days, 26 for working days. A 26-day divisor produces a daily rate about 15% higher.
- Does the leave encashment exemption exist in the new tax regime?
- Yes. It is one of the few salary exemptions that survives in the new regime, alongside gratuity and pension commutation.
About this tool
Built by the ViniOffice team. Figures and rules last reviewed 22 September 2026 against the statutory reference this team maintains. Indian statutory rates are date-effective and change by notification — confirm against the current one before running payroll or filing. This is an estimate for planning, not tax or legal advice. Statutory rates and thresholds are date-effective and change by notification — confirm against the current one before you run payroll or file.
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