Leave Encashment Calculator

The formula

Daily rate = (basic + DA) ÷ 30, then encashment = daily rate × unavailed leaves.

(40,000 + 5,000) ÷ 30 = ₹1,500; 1,500 × 30 = ₹45,000.

Worked examples

₹40,000 + ₹5,000, 30 leaves → ₹45,000
₹40,000 + ₹5,000, 15 leaves → ₹22,500
₹60,000 + ₹0, 20 leaves → ₹40,000
₹25,000 + ₹3,000, 45 leaves → ₹42,000

Why the divisor is 30

Indian payroll convention divides the month by 30 regardless of its actual length, which is also the basis for leave deductions and per-day salary calculations. Using 26 working days instead would raise the daily rate but is not the standard for leave encashment, so check which convention your employer uses before comparing offers.

Tax treatment

Encashment of earned leave during service is generally taxable as salary in the year received, with tax deducted at source. Encashment at retirement is treated differently: there is an exemption under Section 10(10AA), subject to a limit and to the amount actually received. The relief under Section 89 can also apply where a lump sum pushes you into a higher slab.

What to confirm

• The leave balance. Only earned or privilege leave is normally encashable; casual and sick leave usually are not.
• The salary base. Some employers use basic only, others basic plus DA, and a few include a fixed allowance.
• Company policy caps. Many organisations limit encashment to a set number of days a year or at separation only.
• Notice-period adjustment. Unserved notice can be set off against the final settlement.

The daily rate comes from basic plus dearness allowance divided by 30, so the encashment is not the same as a month of gross salary. Thirty unavailed days at ₹1,500 is ₹45,000, and the amount is normally taxable unless encashed at retirement. Rules differ on the maximum number of days that can be carried or encashed, and some employers allow encashment only on separation, so check the policy before counting on the payout.

Frequently Asked Questions