Leave Balance & Leave Encashment Calculator
Leave balance is simply how many days someone has left — but it's easy to get wrong because leave accrues over the year, different types (casual, sick, earned) have different rules, and taken leave has to be subtracted correctly. This tool tracks entitlement and usage per leave type (Balance tab) and also calculates the encashment amount with the correct tax treatment under s.10(10AA) of the Income Tax Act 1961 (Encashment tab).
How to use
Leave Balance tab
- Select the Financial Year and enter your Date of Joining.
- For each leave type (Casual, Sick, Earned, etc.), enter: entitled days, days availed, and carry-forward from the previous year.
- Click Add leave type to add custom rows (Compensatory Off, Study Leave, etc.).
- Click Calculate Balances. The table shows Total Available, Availed, Balance, and a status indicator.
Leave Encashment tab
- Enter your Monthly Basic Salary and DA (Dearness Allowance — enter 0 if not applicable).
- Enter the Leave Days to encash (accumulated earned leave balance).
- Select the Divisor: 30 (calendar month) or 26 (working days convention).
- Select the Scenario: During service, Resignation/Retirement (non-govt), Retirement/Death (govt), or Death (heirs of non-govt employee).
- If non-govt retirement, two additional inputs appear: Average Monthly Salary (Basic + DA averaged over last 10 months before retirement) and Completed Years of Service. These are required to compute conditions (c) and (d) of s.10(10AA)(ii).
- Click Calculate Encashment. The output shows the encashment amount, the formula, all four s.10(10AA)(ii) conditions, and the exempt and taxable amounts.
How it works
Leave encashment formula
Encashment = (Basic + DA) ÷ Divisor × Leave Days
Example: Monthly Basic = ₹50,000, DA = ₹5,000, Leave Days = 30, Divisor = 30:
= (50,000 + 5,000) ÷ 30 × 30 = 55,000 ÷ 30 × 30 = ₹55,000
The daily rate = (Basic + DA) ÷ Divisor = ₹1,833.33 per day. Multiply by days encashed.
Tax treatment — s.10(10AA), Income Tax Act 1961
Source: s.10(10AA), IT Act 1961; CBDT Notification S.O. 2276(E) dated 24 May 2023 — incometaxindia.gov.in
| Scenario | Tax Treatment |
|---|---|
| During service | Fully taxable as salary |
| Government employee — retirement/death | Fully exempt (no ceiling) |
| Non-govt employee — retirement/resignation | Exempt = least of four s.10(10AA)(ii) conditions (max ₹25,00,000) |
| Death — legal heirs (non-govt employee) | Not taxable in legal heirs' hands — CBDT Circular No. 309, 3 July 1981 |
Worked example (tool output)
Scenario: Senior manager (non-government company), retiring with 60 days accumulated Earned Leave. Average salary over last 10 months = ₹80,000; completed years of service = 20.
| Input | Value |
|---|---|
| Monthly Basic | ₹80,000 |
| Monthly DA | ₹0 |
| Leave Days | 60 |
| Divisor | 30 |
| Scenario | Resignation / Retirement (non-government) |
| Average Monthly Salary | ₹80,000 |
| Completed Years | 20 |
Calculation (from tool):
= (80,000 + 0) ÷ 30 × 60
= 2,666.67 × 60
= ₹1,60,000
s.10(10AA)(ii) — Four Conditions:
| Condition | Amount |
|---|---|
| (a) Amount received | ₹1,60,000 |
| (b) Ceiling (₹25,00,000) | ₹25,00,000 |
| (c) 10 × avg monthly salary | ₹8,00,000 |
| (d) (₹80,000 ÷ 30) × min(60, 30 × 20) | ₹1,60,000 |
| Exempt = Least of above | ₹1,60,000 |
Condition (d): leave days capped at min(60, 600) = 60; daily rate = ₹2,666.67; ₹2,666.67 × 60 = ₹1,60,000.
| Result | Value |
|---|---|
| Encashment Amount | ₹1,60,000 |
| Exempt | ₹1,60,000 |
| Taxable | ₹0 |
Conditions (a) and (d) are both ₹1,60,000 — the binding minimum. Entire encashment is exempt under s.10(10AA)(ii).
Worked example — during service
Scenario: Employee at a private company takes encashment of 15 Casual Leave days during the financial year.
| Input | Value |
|---|---|
| Monthly Basic | ₹60,000 |
| Monthly DA | ₹0 |
| Leave Days | 15 |
| Divisor | 30 |
| Scenario | During service |
= (60,000 + 0) ÷ 30 × 15 = 2,000 × 15 = ₹30,000
| Result | Value |
|---|---|
| Encashment | ₹30,000 |
| Exempt | ₹0 |
| Taxable | ₹30,000 |
Leave encashment during service is taxable in full under s.17(1) of the Income Tax Act as part of salary income.
Tips for managing leave
Track encashment-eligible and non-eligible leave separately. Casual Leave typically lapses at year-end and is not encashable. Earned Leave (Privilege Leave) usually accumulates and is encashable. Check your appointment letter for which types are eligible.
Maximise accumulation before retirement. Because encashment at retirement is tax-exempt up to ₹25,00,000, employees nearing retirement often benefit from accumulating Earned Leave rather than taking it as paid holiday. The ceiling is per person per lifetime of employment (not per job), so prior encashments reduce the available exemption.
Government employees have no ceiling. Central and State government employees enjoy full tax exemption on leave encashment at retirement or death — the ceiling applies only to non-government employees.
Use divisor 26 if your salary slip is structured that way. Some employers compute daily rate as Gross/26 for deductions and leave payments. Using the wrong divisor leads to a different encashment amount. When in doubt, your HR policy document will specify the divisor.
DA matters for government employees. Central government employees receive DA linked to the All India Consumer Price Index. At current rates DA can be substantial, significantly increasing the per-day rate and therefore the encashment amount.
Sources
- Income Tax Act 1961, s.10(10AA) — leave encashment exemption — incometaxindia.gov.in
- Income Tax Act 1961, s.17(1) — definition of salary (leave encashment during service taxable) — incometaxindia.gov.in
- CBDT Notification S.O. 2276(E) dated 24 May 2023 — revised ceiling of ₹25,00,000 for leave encashment (effective 01 Apr 2023) — incometaxindia.gov.in
- CBDT Circular No. 309 dated 3 July 1981 — leave salary paid to legal heirs of a deceased employee not taxable in their hands — incometaxindia.gov.in
Last updated: October 2026
Frequently Asked Questions
- What is leave encashment and when can it be claimed?
- Leave encashment is the cash equivalent of accumulated but unutilised leave, paid by the employer to the employee. It can arise during service (taxable), at resignation or retirement (partially or fully exempt from tax), or on death (amount goes to legal heirs). The encashment amount is computed as: (Basic + DA) ÷ Divisor × Number of Leave Days.
- What divisor should I use — 26 or 30?
- The choice of divisor depends on your organisation's policy. A divisor of 30 is based on a 30-day calendar month; a divisor of 26 treats a month as having 26 working days (excluding Sundays). Many central government employees use 26; private sector practice varies. When in doubt, check your appointment letter or leave policy.
- Is leave encashment tax-exempt?
- It depends on the scenario. Government employees (Central and State) are fully exempt at retirement or death — no ceiling. Non-government employees at resignation or retirement are exempt up to ₹25,00,000 per CBDT Notification dated 24 May 2023, effective 1 April 2023. Leave encashment received during service is fully taxable as salary.
- What is the ₹25,00,000 ceiling for leave encashment?
- The CBDT revised the tax-exemption ceiling for non-government employees to ₹25,00,000 from 1 April 2023 (Notification S.O. 2276(E) dated 24 May 2023). However, the ceiling is only one of four conditions under s.10(10AA)(ii) — the exempt amount is the least of: (a) actual encashment received, (b) ₹25,00,000, (c) 10 × average monthly salary over the last 10 months, and (d) (average monthly salary ÷ 30) × capped leave days (leave days capped at 30 per completed year of service). The ceiling does not apply on death — leave salary paid to legal heirs is not taxable per CBDT Circular No. 309 dated 3 July 1981.
- How do I calculate my leave balance?
- In the Leave Balance tab, enter each leave type (Casual, Sick, Earned, Maternity/Paternity, etc.) with its entitled days for the year, days availed, and any carry-forward from the previous year. The tool calculates: Total Available = Entitled + Carry-Forward; Balance = Total Available − Availed.
- Can I track multiple leave types?
- Yes. Use the 'Add leave type' button to add as many rows as your policy defines. Each row has separate columns for entitlement, availed, and carry-forward days.
- What is DA for leave encashment purposes?
- DA (Dearness Allowance) is included in the encashment formula because it forms part of the basic pay for retirement benefit calculations. Private sector employees typically have zero DA; government employees have DA linked to the cost-of-living index. Include any DA your employer pays in the DA field, or leave it at zero if there is none.
- Does the encashment calculation on this tool account for all conditions?
- The tool computes the encashment amount using the standard formula (Basic + DA) ÷ Divisor × Days and shows the tax treatment by scenario. The actual exempt amount under s.10(10AA)(ii) is subject to four conditions in the Act — the ceiling of ₹25,00,000 is one of them. Consult a tax advisor for the precise computation.