Leave Encashment Tax Calculator
Enter your leave encashment details to see how much is taxable.
Runs entirely in your browser — your numbers never leave this page.
How it works
Leave encashment at retirement/resignation gets partial exemption under 10(10AA):
- Government employees: fully exempt. Everyone else: least of four limits.
- The four limits: Rs 25 lakh lifetime cap · 10 months' average salary · cash equivalent of unavailed leave (max 30 days per year of service) · actual amount received.
- During service: any encashment while employed is fully taxable as salary — no exemption.
- 89(1) relief: if the lump sum pushes you into a higher slab, relief under 89(1) can cut the extra tax.
- Retirement timing: resigning vs retiring doesn't change the exemption — leaving service is what counts.
Frequently asked questions
Is leave encashment taxable?
During service: fully taxable. At retirement/resignation: exempt up to the least of Rs 25L, 10 months' salary, leave-credit value, and amount received.
What is the Rs 25 lakh limit?
The lifetime exemption cap under 10(10AA), raised from Rs 3L in 2023. Earlier exemptions reduce what's left.
Are government employees exempt?
Yes — Central/State government employees get full exemption on retirement leave encashment.
How is average salary computed?
Average of basic + DA (not allowances) for the 10 months before retirement.
What is 89(1) relief?
Relief when a lump sum spikes your slab — it recomputes tax as if the income arrived over the years, reducing the hit.
Is encashment during service exempt?
No — leave encashed while still employed is fully taxable as salary.
Does resignation qualify?
Yes — retirement OR resignation (leaving service) qualifies for the exemption.
What about unused sick leave?
Only earned/privilege leave counts toward the exemption calculation.
Can I claim it across two employers?
The Rs 25L cap is lifetime across all employers — earlier exemptions count.
Is it EEE like PF?
No — only the exempt portion escapes tax; the rest is taxed as salary in the year received.