Calculation formula
Leave encashment value = (Basic + DA per month) / 30 × unutilised leave days. Many employers use 26 days (working days per month) instead of 30 — confirm with your HR policy.
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Calculate the value of unutilized leave at retirement or exit.
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Leave encashment value = (Basic + DA per month) / 30 × unutilised leave days. Many employers use 26 days (working days per month) instead of 30 — confirm with your HR policy.
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Non-government employees: leave encashment on retirement is exempt up to the lower of ₹25,00,000 or 10 months' average salary (basic + DA + commission based on last 10 months). Government employees: fully exempt without ceiling.
Encashment of earned leave while still in service (not on retirement) is fully taxable as salary income — Section 10(10AA) exemption applies only on retirement or superannuation.
Some employers cap accumulated earned leave at 300 days; others at the leave earned in the last 3 years. Encashment is typically allowed only up to the accumulation cap — excess leave lapses on retirement.
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