The exempt and the taxable halves of a leave payout, with the rule that capped it
Estimates only, not financial advice. What you type stays on your device. Checked against sources on 23 Oct 2026.Tax is where a leave payout surprises people. For a private employee the exempt part is the least of four figures, and this page starts at a salary large enough that the four genuinely disagree, then names which one did the capping. Government employees see the whole payout exempt, and a payout taken while still working is taxed in full.
Payout = 240 days × ₹1,50,000 ÷ 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 | ₹12,00,000 | Yes, this one caps it |
| the ₹25 lakh lifetime limit | ₹25,00,000 | – |
| 10 months of average salary | ₹15,00,000 | – |
| leave counted at 30 days for each completed year | ₹12,00,000 | – |
| Exempt | ₹12,00,000 |
Rates and rules read from the sources listed on this page (the earliest on 23 Oct 2026); they may have changed since.
Enter your Basic pay + DA a month and the unused leave being paid; the page opens on 1.5 lakh and 240 days.
Enter your Completed years of service.
Choose Private or PSU, or Central or state government, under "Who is your employer?".
For a private employer, enter any exemption already claimed in an earlier year.
Read the Tax-free and Taxable parts and which of The four caps limited the exemption.
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.
The rest of the article, and all 7 questions about Leave Encashment Calculator, are on the Leave Encashment Calculator page.
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.
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: Salary After Tax Calculator – Old regime or new regime, and what each leaves you every month · Notice Period Buyout Calculator – What an employer recovers for the notice days you do not serve.
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