Leave Encashment Exemption Calculator

⚡ In shortWhen you retire or leave a job, the amount your employer pays for your unused earned leave is called leave encashment — and for a non-government employee, only part of it is tax-free under section 10(10AA). For a non-government employee, the exemption is the least of four amounts: the actual leave encashment received; the ₹25,00,000 lifetime cap (raised from ₹3,00,000 with effect from 2023); ten months of average salary (Basic + DA of the last ten months); and the cash value of unused leave, where leave is counted at a maximum of 30 days for each completed year of service. Anything above the exempt amount is added to your salary income and taxed at slab rates. Leave encashment received while still in service (not on retirement) is fully taxable. This calculator applies all four limits and shows both the exempt and the taxable portion.

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How it is calculated

For a non-government employee, the exemption is the least of four amounts: the actual leave encashment received; the ₹25,00,000 lifetime cap (raised from ₹3,00,000 with effect from 2023); ten months of average salary (Basic + DA of the last ten months); and the cash value of unused leave, where leave is counted at a maximum of 30 days for each completed year of service. Anything above the exempt amount is added to your salary income and taxed at slab rates. Leave encashment received while still in service (not on retirement) is fully taxable. This calculator applies all four limits and shows both the exempt and the taxable portion.

Frequently asked questions

What is the leave-encashment exemption limit?

For non-government employees the lifetime exemption cap is ₹25,00,000, raised from ₹3,00,000 in 2023. The actual exemption is the least of four limits, so it can be lower.

Is leave encashment during service taxable?

Yes. Leave encashed while you are still employed is fully taxable. The 10(10AA) exemption applies only to encashment on retirement or leaving the job.

How is government-employee leave encashment taxed?

Leave encashment on retirement is fully exempt for central and state government employees. The least-of-four rule and the ₹25 lakh cap apply only to non-government employees.

How many leave days count for the exemption?

Unused leave is counted at a maximum of 30 days per completed year of service when computing the cash-value limit — even if your employer allowed you to carry more.

Related reading

India Law Simplified is an AI-assisted tool, not a substitute for a licensed CA or advocate. Tax rules and limits change with each Finance Act — verify before relying on any figure.