Calculate the tax-exempt and taxable portion of your leave encashment under Section 10(10AA). This leave salary calculator applies the ₹25 lakh exemption limit, the 30 days/year cap, and the least-of-four-limits formula — and doubles as an earned leave balance calculator.
Educational estimate; verify with payroll and your Form 16. Not affiliated with the Income Tax Department.
Leave encashment (also called leave salary) is the cash an employer pays for the earned leave (EL) or privilege leave (PL) you have accumulated but not used. You can receive it during service, at resignation or retirement, or your legal heirs can receive it on death. How much of it is tax-free depends on who your employer is and when you receive it, governed by Section 10(10AA) of the Income Tax Act, 1961.
| When received | Government employees | Private / PSU employees |
|---|---|---|
| During active service | Fully taxable | Fully taxable |
| Retirement / resignation | Fully exempt | Exempt up to ₹25 lakh (least of 4 limits) |
| Death (paid to legal heirs) | Fully exempt | Fully exempt |
PSUs, nationalised banks, municipal corporations and autonomous bodies are treated as private sector employers for this exemption.
For non-government employees, the tax-exempt amount under Section 10(10AA)(ii) is the least of these four amounts:
Exempt = min( Actual, ₹25,00,000, 10 × Avg Salary, Cash Equivalent ) • Taxable = Actual − Exempt
Private employee, 20 completed years, average monthly salary ₹1,50,000, employer grants 40 days' leave/year, 150 days availed during service.
| 1. Actual received — (40×20−150)÷30 × ₹1,50,000 | ₹32,50,000 |
| 2. Statutory ceiling | ₹25,00,000 |
| 3. 10 months' average salary | ₹15,00,000 ← lowest |
| 4. Cash equivalent — (30×20−150)÷30 × ₹1,50,000 | ₹22,50,000 |
| Tax-exempt (least) / Taxable balance | ₹15,00,000 / ₹17,50,000 |
Enter your employer type (government or private/PSU), when you received the leave salary, your average monthly salary (Basic + DA), completed years of service, and your earned leave balance. The leave encashment calculator applies Section 10(10AA): it computes the least of the four statutory limits and splits your payout into a tax-exempt portion and a taxable portion shown instantly.
Government employees get 100% exemption on leave encashment at retirement or resignation. For non-government (private/PSU) employees, the maximum lifetime tax-exempt amount is ₹25,00,000 under Section 10(10AA)(ii), raised from ₹3 lakh by CBDT Notification No. 31/2023 dated 24 May 2023. This leave encashment exemption calculator subtracts any exemption you already claimed from earlier employers.
The exemption is the least of: (1) actual leave encashment received, (2) ₹25 lakh statutory ceiling, (3) 10 months' average salary, and (4) cash equivalent of unused earned leave with entitlement capped at 30 days per completed year of service. This leave salary calculator highlights which of the four limits is the lowest (binding) amount.
For the cash-equivalent limit, the Income Tax Act caps creditable earned leave at 30 days for every completed year of service — even if your employer grants 40 or 45 days a year. The earned leave calculator first works out your actual leave balance, then recomputes a tax-capped balance at 30 days/year to apply the exemption formula.
Yes. Leave encashed while you are still employed is fully taxable as salary for both government and private employees. The Section 10(10AA) exemption applies only to leave encashment received at retirement, resignation, or death. Select 'During active service' in the calculator to see the fully taxable result.
No. Leave encashment received by the legal heirs of an employee who died in service or after retirement is fully exempt from income tax for both government and private sector employees (CBDT Circular No. 309 dated 3 July 1981). The ₹25 lakh ceiling does not apply in death cases.
Leave balance = (earned leave credited per year × completed years of service) − leaves availed − leaves already encashed during service, then capped at your employer's carry-forward / accumulation limit. This leave balance calculator floors the result at zero and also shows the separate 30 days/year tax-capped figure used for the exemption.
Most employers cap how many earned leaves you can carry forward or accumulate — for example only 15 leaves a year may carry over, or total accumulation may be capped at 240/300 days, with the excess lapsing. Lapsed leaves never become part of your exit balance, so they lower both the actual amount you receive and the cash-equivalent exemption limit. Tick 'My employer caps leave carry-forward / accumulation' and enter your ceiling, or use the exact F&F amount if you know it.
Yes. The Section 10(10AA) exemption on leave encashment at retirement or resignation applies under both the old and new tax regimes. Unlike many other exemptions removed in the new regime, this one remains available.
This calculator is for informational and educational purposes only. Results are estimates based on the assumptions you provide and may not reflect your actual tax position. Leave encashment treatment can vary with employer policy and individual circumstances. Please consult a qualified Chartered Accountant or tax advisor before filing your return.
Educational estimate only. Validate with payroll records and official notifications.