Leave Encashment Calculator
Calculate your leave encashment as per Indian Labor Laws
Calculator
Important Information
Tax Exemption Rules
At Retirement & Resignation:
Exempt up to ₹25,00,000
On Death (paid to nominee):
Fully exempt (no tax liability)
During Service:
Fully taxable as salary income (No exemption)
Leave Encashment Calculator: Know the Value of Your Unused Leaves
Managing employee leave is an important part of HR and payroll. But what happens when you don't use up all your earned leaves? That's where leave encashment comes in. For employees, it means converting unused paid leave into cash. For employers, it means a structured and compliant way of compensating employees.
The Leave Encashment Calculator helps estimate the amount payable for unused leave days quickly and accurately, following standard calculation rules used in India.
What Is Leave Encashment?
Leave encashment is the payment made by an employer to an employee for the number of earned/privilege leaves not taken. It can be received:
- During employment (subject to company policy)
- At the time of resignation or retirement
- In case of death, where payment goes to the nominee
How Is Leave Encashment Calculated?
Most companies follow a standard formula based on salary and number of unused leave days.
Formula:
Leave Encashment = (Basic Salary + Dearness Allowance) ÷ 30 × No. of Leave Days
- Basic Salary + DA: Only these components are considered, not allowances like HRA or incentives
- 30 days: A month is generally taken as 30 days for calculation purposes
- Leave Days: The number of unused eligible leaves to be encashed
Example Calculation
Suppose an employee has:
- Basic + DA = ₹30,000 per month
- Unused Earned Leave = 20 days
Then,
Leave Encashment = (30,000 ÷ 30) × 20 = ₹20,000
This amount is what the employee would receive for encashing 20 days of leave.
Eligibility & Rules
- Private sector employees: Leave encashment depends on the company's leave and HR policy
- Government employees: Benefit from well-defined rules, with higher exemptions and allowances
- At Retirement: Leave encashment is payable for accumulated earned leave as per the employer's rules
Tax Implications of Leave Encashment
Tax treatment depends on when and how the payment is received:
During Service:
Fully taxable, added to salary income
At Retirement:
Exempt up to ₹25,00,000
At Resignation:
Exempt up to ₹25,00,000
In Case of Death:
Fully exempt, paid to the nominee
Why Use a Leave Encashment Calculator?
For Employees:
Helps you know the monetary value of unused leaves and plan finances accordingly
For Employers/HR Teams:
Ensures accurate, transparent, and compliant calculations for payroll and settlements
Step-by-Step Guide to Use the Calculator
- Enter your monthly Basic + DA
- Add the number of unused leave days
- Select the appropriate encashment type
- Choose the dividing factor (30 or 26 days)
- Click calculate to instantly view the encashment amount you are entitled to
Final Thoughts
Leave encashment is an important part of employee benefits and exit settlements. With the Leave Encashment Calculator, you can quickly estimate payouts, understand tax implications, and plan better.
For employees:
It provides clarity and financial foresight
For employers:
It ensures compliance and fairness in handling leave policies