Retirement & Benefits
Leave Encashment Calculator
Quick answer: The FinTax24 Leave Encashment Calculator computes the tax impact of earned-leave encashment at retirement / exit. Government employees get full Section 10(10AA) exemption; non-government employees get ₹25 lakh exemption (Notification GSR 238(E)) on encashment of earned leave up to the period of 30 months' salary.
Leave Encashment Calculator
Calculate tax-free and taxable portions of leave encashment on retirement.
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Disclaimer: Results are for indicative purposes only and may vary based on actual rates, rules, and policies. Please consult a FinTax24 expert for binding advice.
How to use this calculator
Follow these 4 steps for an accurate result.
- 1
Enter employer type
Choose Government (full exemption) or Non-Government (₹25 lakh cap) employer.
- 2
Enter last drawn salary
Type basic + DA (including commission as % of turnover) at retirement.
- 3
Enter earned leaves
Type the number of earned leaves accumulated at exit (capped at 30 months equivalent).
- 4
Read taxable amount
Calculator shows exempt amount, taxable amount and tax at the marginal slab.
Key takeaways
- Section 10(10AA) exempts leave encashment up to ₹25 lakh for non-Government employees (raised from ₹3 lakh in 2023).
- Government employee encashment is fully exempt, regardless of amount.
- 30 months of last drawn salary is the standard cap on exemption calculation.
- Surfaces taxable leave encashment, tax amount and the net amount to encash.
Frequently asked questions
Quick answers to common questions about leave encashment calculator.
What is the tax-free limit on leave encashment?
For non-Government employees, Section 10(10AA) read with Rule 3(4)(iii) exempts leave encashment up to ₹25 lakh (Notification GSR 238(E) effective from 24 May 2023). The cap was ₹3 lakh earlier. Government employees get unlimited exemption under Section 10(10AA).
How is the 30-month cap computed?
The 30-month cap is on the salary basis — i.e., you cannot claim exemption for encashment beyond what equals 30 months of last drawn basic + DA + commission. If you encash 36 months, the excess 6 months is taxable. Calculator flags this automatically.
Is leave encashment allowed on resignation?
Most companies allow leave encashment only on retirement / exit after a minimum service period. Resignation mid-career may not entitle you to encashment — the policy depends on the employer. Calculator assumes eligibility is confirmed.
What is the TDS treatment?
Employer deducts TDS on the taxable component of leave encashment at the marginal slab rate. Section 192 reads with Section 10(10AA) governs the exemption. Form 12BA / Form 16 discloses the encashed amount and exemption claimed.
Are sick leave and casual leave encashable?
Only earned leave (sometimes called privilege leave / annual leave) is encashable. Sick leave, casual leave, and special leave are typically not encashable. Calculator counts only "earned leaves" — choose the right category.
How does leave encashment interact with gratuity?
Leave encashment is independent of gratuity. Both are exit-time benefits. Gratuity is exempt up to ₹20 lakh; leave encashment is exempt up to ₹25 lakh (non-Government). Calculator computes them separately — combined exemption can be ₹45 lakh for non-Government employees.
Sources & authority: For regulations on leave encashment calculator, refer to gst.gov.in, mca.gov.in, incometax.gov.in, rbi.org.in, Section 10(10AA) — Leave Encashment, Notification GSR 238(E) — 2023 amendment, Income Tax Rule 3(4).
Last reviewed by: FinTax24 Compensation Desk · Reviewed on:
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