Calculate your earned leave encashment amount at retirement or resignation. See tax exemption under Section 10(10AA) and net payout instantly.
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Explore investment options on Groww →Calculate your SIP returnsLeave encashment means getting paid for your unused earned leave (EL) balance instead of taking those days as leave. Employers typically allow encashment at retirement, resignation, or sometimes during service. The amount = Daily salary x Number of leave days.
For government employees: fully tax-exempt at retirement. For private sector employees: exemption under Section 10(10AA) is the minimum of — (a) actual encashment received, (b) 10 months salary x years of service / 26, and (c) Rs 25,00,000 maximum limit. Encashment during service is fully taxable.
The maximum tax exemption on leave encashment is Rs 25,00,000 (Rs 25 lakh) for private sector employees as updated in Budget 2023. This was enhanced from the earlier Rs 3,00,000 limit. Government employees have full exemption without any cap.
Most central government employees can accumulate up to 300 days of earned leave. Private sector leave encashment limits depend on the company HR policy. Typically 15-30 days of EL is allowed to be accumulated per year, with a max carryforward of 240-300 days.
Some employers allow leave encashment during service (typically once a year). However, any such encashment during service is fully taxable — no Section 10(10AA) exemption applies. Only encashment at retirement, resignation, retrenchment, or death qualifies for tax exemption.