Leave Encashment Exemption Calculator

Leave encashment is fully tax-free for Central and State government employees under section 10(10AA) (section 19(1) of the Income-tax Act 2025). For anyone else, only the lowest of four amounts is tax-free: the encashment received, ₹25,00,000 minus exemption already claimed, 10 months' average salary, and unused leave of up to 30 days per completed year of service, valued at average monthly salary. The rest is taxable.

1. A Central or State government employee's leave encashment is fully exempt under section 10(10AA) (section 19(1), Table Sl. 13 of the 2025 Act).
2. For anyone else, limit (a) is the leave encashment actually received.
3. Limit (b) is ₹25,00,000 minus any exemption already claimed from earlier employers, because the cap set by Notification 31/2023 from 1 April 2023 is a lifetime total.
4. Limit (c) is 10 times the average monthly salary.
5. Limit (d) is the unused leave, counting at most 30 days per completed year of service, divided by 30 and multiplied by the average monthly salary.
6. The lowest of the four limits is tax-free (Table Sl. 14 of the 2025 Act) and the rest is taxable.

Suresh leaves a private-sector job in FY 2026-27 after 25 completed years. He receives ₹6,60,000 for 330 days of unused leave, his average monthly salary is ₹60,000, and he has not claimed this exemption before.

1. Limit (a), amount received: ₹6,60,000.
2. Limit (b), the ₹25,00,000 cap, with no exemption claimed before: ₹25,00,000.
3. Limit (c), 10 × ₹60,000: ₹6,00,000.
4. Limit (d), 330 days ÷ 30 × ₹60,000: ₹6,60,000 (25 years allow up to 750 days, so all 330 count).
5. Tax-free: the lowest, limit (c), ₹6,00,000; taxable: ₹6,60,000 − ₹6,00,000 = ₹60,000.

₹6,00,000 of Suresh's leave encashment is tax-free and ₹60,000 is taxable.

For a non-government employee, the exempt amount is the lowest of four limits: the encashment received, ₹25,00,000 minus exemption already claimed, 10 months' average salary, and the cash value of unused leave at up to 30 days per completed year of service. Whatever is left is taxable.

₹25,00,000 for a non-government employee, a cap set by CBDT Notification 31/2023 (S.O. 2276(E)) from 1 April 2023. It is a lifetime limit across all employers, so exemption claimed from an earlier employer reduces it.

Yes. Leave encashment received by a Central or State government employee is fully exempt under section 10(10AA), which is section 19(1), Table Sl. 13 of the Income-tax Act 2025.

No. PSU employees count as non-government employees, so their exemption is the lowest of the four limits, within the ₹25,00,000 lifetime cap.

At most 30 days for each completed year of service. Leave above that is ignored when the cash value of unused leave, one of the four limits, is worked out.