What unused leave pays on leaving a job, and how much of it is tax free
Estimates only, not financial advice. What you type stays on your device. Checked against sources on 23 Oct 2026.Leave encashment pays unused earned leave at basic plus DA divided by 30, so 120 days on ₹60,000 a month comes to ₹2,40,000. For a private employee the tax-free part is the least of four limbs, capped at ₹25 lakh for a lifetime; a government employee pays no tax on it.
Payout = 120 days × ₹60,000 ÷ 30. Lifetime tax-free limit ₹25,00,000 for non-government employees, in force from 1 Apr 2023.
Estimates for information only, not tax advice.
| The exemption is the least of | Amount | Binding? |
|---|---|---|
| the amount you actually received | ₹2,40,000 | Yes, this one caps it |
| the ₹25 lakh lifetime limit | ₹25,00,000 | – |
| 10 months of average salary | ₹6,00,000 | – |
| leave counted at 30 days for each completed year | ₹2,40,000 | – |
| Exempt | ₹2,40,000 |
Rates and rules read from the sources listed on this page (the earliest on 23 Oct 2026); they may have changed since.
Set the Unused earned leave in days, or pick a leave balance chip.
Set the Basic pay + DA a month and your Completed years of service.
Choose the days your employer divides a month by, and whether you work for a government or a private employer.
Read the Leave encashment paid and how much of it is tax-free, then press Share result.
Unused earned leave is paid out when most people leave a job, and two separate questions follow: how much, and how much of it survives tax.
The payout is the simpler one. Employers work it out as leave days × (basic pay + dearness allowance) ÷ 30, so 120 days at ₹60,000 a month is ₹2,40,000. Some employers divide by 26 working days instead, which pays more; the divisor is a choice here because your payslip is what it is, not what a formula says it should be.
Tax is where this gets sharp, and it splits three ways. A government employee's leave encashment on retirement is exempt in full. Anybody encashing leave while still employed pays tax on all of it, whoever the employer is — this is the part most people get wrong. For everyone else, leaving a private job, the exempt amount is the least of four figures: the amount actually received; ₹25,00,000 reduced by any exemption already claimed in an earlier year; ten months of average salary; and the cash value of leave counted at no more than 30 days for each completed year of service. The calculator shows all four and names which one did the capping, because "₹3,00,000 is taxable" is useless without knowing why.
That fourth limb catches people with long balances. 200 days of leave after 5 years of service is more than 30 × 5, so only 150 days can ever be exempt however generous the employer was.
The ₹25 lakh figure is a government number and is treated as one. It was read on the Ministry of Finance press release of 25 May 2023, which notifies CBDT Notification No. 31/2023 dated 24 May 2023, effective 1 April 2023; it was ₹3 lakh before that. The other three limbs sit in section 10(10AA)(ii) itself and are still awaiting a reading on a primary source, which is why this page is held for review.
Estimates only, not tax advice. Confirm with your employer and your tax adviser.
Leave encashment = number of unused earned leave days × (monthly basic pay + dearness allowance) ÷ 30. For 120 days at ₹60,000 a month that is ₹2,40,000. Some employers divide by 26 working days instead of 30, which pays about 15% more, so check which your company uses.
Depends on who you work for and when you take it. A government employee's payout on retirement is fully exempt. Anyone encashing leave while still employed pays tax on the whole amount. A private employee leaving the job is exempt up to the least of four limits, with ₹25 lakh the lifetime ceiling.
₹25,00,000 over a working lifetime for non-government employees, raised from ₹3 lakh with effect from 1 April 2023. The limit applies across every employer and every year combined, so exemption already claimed in an earlier job is deducted before this payout is looked at.
Thirty days for each completed year of service, at most. Somebody with 200 days saved after 5 years has a countable balance of 150 days, so the rest is taxable however large the employer's payout was. Long service is what raises this limb, not a generous leave policy.
No. Section 10(10AA)(ii) covers earned leave at credit at the time of leaving, "whether on superannuation or otherwise", so resignation is covered on the same terms as retirement. What changes the answer is encashing leave while still employed, which is taxed in full.
Basic pay plus dearness allowance, averaged over the last ten months for the tax calculation. House rent allowance, conveyance, bonus and other allowances are left out. Enter that average here rather than your gross salary, or the exemption will come out larger than the law allows.
Leave encashment ka paisa kaise milta hai has a short answer: the employer pays it with the full and final settlement after your last working day, along with any gratuity and pending salary. Enter your leave balance and basic pay above to see the amount and the part of it that is tax free.
Rates and rules change; check the source before you rely on a figure.
Still stuck? Ask about Leave Encashment Calculator and anybody who knows can answer. No account needed.
Same job, other tools: Superannuation Date Calculator – The last day of the month rule that decides a government retirement · Years Left to Retirement – How long is left before you retire, in years, months and days.
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