Leave Encashment Tax Calculator
How leave encashment is taxed
Leave encashment is money for unused paid leave. Encashment during service is fully taxable. Encashment at retirement or resignation is fully exempt for government employees and partly exempt for others. The calculator above works out the exempt and taxable parts.
The exemption for non-government employees
The exempt amount is the least of:
- Actual leave encashment received;
- ₹25 lakh (overall lifetime limit, raised from ₹3 lakh in FY 2023-24);
- 10 months' average salary (basic + DA);
- Cash value of up to 30 days' leave per completed year of service.
A worked example
Received ₹6,00,000; average salary ₹50,000; 20 years: least of ₹6,00,000 / ₹25,00,000 / ₹5,00,000 / ₹10,00,000 = ₹5,00,000 exempt, leaving ₹1,00,000 taxable.
Frequently asked questions
Is leave encashment taxable?
During service, fully taxable. At retirement, fully exempt for government and partly exempt for others.
What is the exemption limit?
For non-government employees, ₹25 lakh overall (raised from ₹3 lakh in FY 2023-24).
How is the exempt amount found?
The least of actual, ₹25 lakh, 10 months' average salary, and 30 days' leave per completed year.
Is encashment during the job exempt?
No, it is fully taxable.
What salary is used?
The average of the last 10 months' basic + DA.
Source: Income-Tax Act, Section 10(10AA), and CBDT notification raising the limit to ₹25 lakh. Verify before filing. ComplyKraft is independent; this is not professional advice.