# Leave encashment calculator India 2026 | Peoplo.ai URL: https://peoplo.ai/in/en/tools/leave-encashment-calculator/ > Free leave encashment calculator: basic plus DA ÷ 30 × unused leave days, and how much is tax-free at exit, up to ₹25 lakh in the private sector. People, companies and figures in product examples on this page are sample data, not customers. [Free calculators](https://peoplo.ai/in/en/tools/) Free tool # Leave encashment calculator Leave encashment is monthly basic pay plus DA ÷ 30 × unused leave days, so 45 days on ₹60,000 is ₹90,000. Encashed while you are employed, it is taxed as salary. Encashed when you leave, it is tax-free up to the least of four limits, with a ceiling of ₹25,00,000 for private-sector employees. Leave encashment ₹90,000 Tax-free ₹90,000 Taxable as salary ₹0 Tax-free is the least of Leave credit, max 30 days a year ₹90,000 10 months’ average salary ₹6,00,000 Limit left of ₹25,00,000 ₹25,00,000 Amount received ₹90,000 Estimates for general information, using rules checked 22 October 2026. Not tax or legal advice. Nothing you enter leaves your browser. ## How is leave encashment calculated? Divide monthly basic pay plus DA by the days in a month your policy uses, then multiply by the unused leave days. An employee leaving after 7 years with **45 days** of earned leave and basic plus DA of **₹60,000** : | Policy counts a month as | Calculation | Leave encashment | | --- | --- | --- | | 30 calendar days | ₹60,000 ÷ 30 × 45 | ₹90,000 | | 26 working days | ₹60,000 ÷ 26 × 45 | ₹1,03,846 | Which divisor applies, and whether DA or other allowances count, is set by your leave policy or appointment letter, and by your state’s shops and establishments law. ## Is leave encashment taxable? It depends on when it is paid. **While you are employed** , for example when a company pays out leave above a carry-forward limit each year, leave encashment is salary and fully taxable. **When you leave** , on retirement whether on superannuation or otherwise, central and state government employees get the full amount tax-free. Everyone else gets the least of four amounts tax-free (Income-tax Act 2025, section 19): - Leave credit at exit, counting at most 30 days for each completed year of service, valued at average salary. - 10 times the average monthly salary of the last 10 months. - **₹25,00,000** , the limit notified from 1 April 2023, less anything exempted at earlier jobs. - The leave encashment actually received. Salary here means basic pay plus DA (if the terms of employment include it), and no other allowances or perquisites. ## A worked example with a taxable part An employee leaves after 8 completed years with 270 days of leave and basic plus DA of ₹60,000 throughout. They receive ₹5,40,000. | Limit | Amount | | --- | --- | | Leave credit: 8 years × 30 days = 240 days, at ₹60,000 a month | ₹4,80,000 | | 10 months’ average salary | ₹6,00,000 | | Notified limit | ₹25,00,000 | | Amount received | ₹5,40,000 | The least is ₹4,80,000, so that much is tax-free and **₹60,000** is taxed as salary. ## When is leave encashment paid? At exit, with the [full and final settlement](https://peoplo.ai/in/en/blog/full-and-final-settlement-two-working-days/) , which the Code on Wages requires within two working days of the last day. Gratuity follows its own 30-day rule; see the [gratuity calculator](https://peoplo.ai/in/en/tools/gratuity-calculator/) . ## Work it out for every leaver In Peoplo.ai, the [exit coordinator agent](https://peoplo.ai/in/en/ai-agents/) reads the leave balance and pay from the employee record, counts the encashable leave and prepares the [full and final settlement](https://peoplo.ai/in/en/platform/onboarding-exits/) . A person approves it before anything is paid. ## How it is worked out Leave encashment is **monthly basic pay plus DA ÷ days in a month × unused leave days** , with 30 or 26 days as your policy says. At exit, the tax-free part for a private-sector employee is the least of the four limits shown. Leave credit counts at most 30 days for each completed year and is valued at the average salary of the last 10 months, divided by 30. Leave encashed while employed is fully taxable. General information, not tax advice. The calculator does not check your leave policy or state law on how much leave can be carried forward or encashed. Sources · checked 22 October 2026 - [Income Tax Department: Income-tax Act 2025, section 19 (table, serial numbers 13 and 14)](https://wm.incometaxindia.gov.in/web/guest/w/section-19-199) - [Income Tax Department: Notification 31/2023, ₹25 lakh limit for leave encashment](https://wm.incometaxindia.gov.in/web/guest/w/notification-no.-31/2023-f.-no.-200/3/2023-ita-i-/-so-2276-e-) [Read the India payroll compliance guide](https://peoplo.ai/in/en/compliance/) More free tools - [Salary calculator CTC to in-hand pay, with PF, ESI, professional tax and TDS](https://peoplo.ai/in/en/tools/salary-calculator/) - [PF calculator Employee and employer PF, the EPS split and the ₹25,000 ceiling](https://peoplo.ai/in/en/tools/pf-calculator/) - [Income tax calculator Old regime or new regime, side by side](https://peoplo.ai/in/en/tools/income-tax-calculator/) - [HRA calculator How much of your house rent allowance is tax-free](https://peoplo.ai/in/en/tools/hra-calculator/) - [Gratuity calculator What an employee is owed when they leave](https://peoplo.ai/in/en/tools/gratuity-calculator/) - [ESI calculator Who is covered and the 0.75% and 3.25% shares](https://peoplo.ai/in/en/tools/esi-calculator/) Run this for your whole team Peoplo.ai works these out for every employee, every month, and a person approves each payroll run. [Request a demo](https://peoplo.ai/contact/) Questions ## Frequently asked questions Short answers, worked out with the same rules as the calculator above. ### How is leave encashment calculated? Basic pay plus DA for a month, divided by the days your policy counts in a month (usually 30, sometimes 26 working days), multiplied by the number of unused leave days. With ₹60,000 and 45 days, that is ₹60,000 ÷ 30 × 45 = ₹90,000. ### Is leave encashment taxable? Leave encashed while you are still employed is fully taxable as salary. Leave encashed when you leave is tax-free up to the least of four limits; for private-sector employees the overall ceiling is ₹25,00,000. Central and state government employees are fully exempt. ### What is the leave encashment exemption limit for private employees? ₹25,00,000, notified by the CBDT from 1 April 2023 (Notification 31/2023). It is a lifetime limit across all employers, so any amount exempted at an earlier job reduces it. ### Is leave encashment on resignation tax-free? The exemption applies to leave encashed at retirement, whether on superannuation or otherwise. It is generally read to include resignation, so the same four limits apply. Leave encashed while you stay in the job does not qualify. ### Is leave encashment calculated on basic or gross salary? Usually on basic pay plus dearness allowance; your leave policy or appointment letter decides. For the tax exemption, salary means basic plus DA (if the terms of employment include it), and excludes other allowances and perquisites. ### Is leave encashment part of full and final settlement? Yes. Unused earned leave that your policy lets you encash is paid with the full and final settlement, which the Code on Wages requires within two working days of the last day.