Leave Encashment Calculator

Tax exemption under Section 10(10AA)

Leave encashment is the payment made by an employer for unused earned leave at the time of retirement, resignation, or during employment. For central government employees it is fully exempt. For private sector employees, exemption is calculated under Section 10(10AA) of the Income Tax Act based on a formula considering average salary and unused leave days.

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Tax Exempt Amount
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Taxable Amount
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Frequently Asked Questions

Effective April 1, 2023, the tax-exempt limit for leave encashment on retirement (for non-government employees) has been raised to ₹25 lakh. Any encashment above this amount is taxable as salary income in the year of receipt.

Most private sector companies allow encashment of earned/privilege leave accumulated up to a maximum of 30 days per year, with a cap on total carry-forward (typically 60-90 days depending on company policy). Government employees can accumulate up to 300 days of earned leave for encashment on retirement.