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Salary & Retirement · Updated for tax year 2026-27

Leave Encashment Tax Calculator

For non-government employees, leave encashment received on retirement or resignation is tax-free under Section 19 (old sec. 10(10AA)) up to the least of four amounts: the amount received, ₹25 lakh, 10 months’ average salary, and the cash value of unavailed leave (counting at most 30 days a year). Government employees get the full amount tax-free.

Enter your details

Values you enterComputed values
Government employee?

Last 10 months

Result

Leave encashment actually received₹9,00,000Statutory limit (₹25 lakh less earlier exemptions)₹25,00,00010 months’ average salary₹6,00,000Cash value of unavailed leave (max 30 days a year)₹6,00,000Tax-free (least of the above)₹6,00,000Taxable₹3,00,000

Unavailed leave counted: 300 days.

Disclaimer: Computed to the best of our knowledge, as per the law — including the section changes under the Income-tax Act, 2025 — in force on the date this website was last deployed (28 Sep 2026). Results are estimates for guidance only and are not tax, legal or investment advice. Please verify with the Act, rules and notifications, or a qualified professional, before relying on them. Rates and limits last reviewed on 28 Sep 2026.

How to use the Leave Encashment Calculator

  1. 1

    Choose whether you are a government employee — if so, the whole amount is exempt.

  2. 2

    Enter your average monthly basic + DA for the last 10 months, and the leave encashment received.

  3. 3

    Enter your completed years of service, earned leave credited per year and the leave you took or encashed during service.

  4. 4

    Enter any leave-encashment exemption claimed with earlier employers.

Leave encashment exemption

Exempt = least of:

(a) Leave encashment actually received

(b) ₹25,00,000 minus exemption claimed earlier

(c) 10 × average monthly salary of the last 10 months

(d) Unavailed leave days × average monthly salary ÷ 30

Unavailed leave = (min(leave per year, 30) × completed years) − leave taken

Salary means basic + DA forming part of retirement benefits + commission as a fixed % of turnover. Leave encashed while still in service is fully taxable.

Worked example

  • Average salary ₹60,000 a month, 20 years of service with 30 days of leave a year, 300 days taken. Leave encashment received: ₹9,00,000.
  • Unavailed leave = 30 × 20 − 300 = 300 days, worth ₹6,00,000. 10 months’ salary = ₹6,00,000. The ₹25 lakh limit and the ₹9 lakh received are higher.
  • Tax-free: ₹6,00,000. Taxable as salary: ₹3,00,000.

The ₹25 lakh limit

The limit for non-government employees was raised from ₹3 lakh to ₹25 lakh from 1 April 2023 and continues unchanged. It is a lifetime limit across all employers.

Frequently asked questions

Government employees: all of it. Others: the least of the amount received, ₹25 lakh, 10 months’ average salary and the value of unavailed leave (up to 30 days a year of service).