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Leave encashment calculator

What your unused earned leave is worth when you leave, and why the divisor in your policy matters: dividing by 26 rather than 30 pays about fifteen per cent more per day.

Quick Answer

What is my unused leave worth when I resign?

Leave encashment is unused earned leave days × a per-day rate, where the rate is your monthly wages divided by 30 or 26. On ₹60,000 of Basic + DA with 45 days of leave, dividing by 30 gives ₹90,000; dividing by 26 gives ₹1,03,846.

Unlike gratuity, no statute prescribes the formulafor private-sector encashment — the pay component and the divisor both come from your employer's leave policy, and many policies also cap the number of days you can encash. The entitlement is a different question: a worker covered by the OSHWC Code is entitled to encash the leave standing to their credit on separation, with no maximum prescribed by the Code, so a policy cap is worth challenging rather than accepting.

On tax, ₹25 lakh is a ceiling, not an exemption you automatically get. Section 10(10AA)(ii) exempts the leastof four amounts — what you received, ten months' average salary, the value of unused leave capped at 30 days per completed year, and ₹25 lakh across your whole career. On ordinary salaries one of the first three binds long before the ₹25 lakh does. Work the full test through on the tax page.

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What you need
Monthly Basic + DA, unused leave days

Leave encashment calculator

What your unused earned leave is worth when you leave

First: does the law give you leave rights, or does your contract?

Not every private-sector employee has statutory leave rights, and not every one is left to company policy. Which side you fall on changes what you can insist on.

How is your role classified?

We will show you both positions rather than pick one.

Contract and policy govern

Whether the statutory leave provisions reach you depends on your role, and it is worth pinning down.

What governs your leave: Check your appointment letter for how your role is described, then re-run this.

Usually Basic + DA. Some policies encash on gross — check yours, it changes the answer substantially.

From your payslip or HR portal.

Leave blank if your policy has no cap.

Per-day rate is monthly wages divided by

Dividing by 26 pays about 15% more per day than dividing by 30. Your leave policy specifies which applies.

Key takeaways

  • →Encashment = unused earned leave days × (monthly wages ÷ divisor). Your policy sets both the wage component and the divisor.
  • →A divisor of 26 rather than 30 pays about 15% more per day. Find out which your employer uses.
  • →Only earned/privilege leave is normally encashed. Casual and sick leave usually lapse.
  • →A covered worker is entitled to encash the leave standing to their credit on separation, and the OSHWC Code prescribes no maximum. A policy cap is not automatically a statutory one.
  • →Where the OSHWC leave provisions don't reach you — managerial staff, or supervisors above ₹18,000 a month — the policy cap and your State's Shops & Establishments Act govern.
  • →Tax: ₹25 lakh under s.10(10AA)(ii) is a lifetime CEILING, not an automatic exemption. The exemption is the least of four limbs, and a service- or salary-based limb usually binds first.

How encashment is calculated

The arithmetic is simple; the inputs are where the money is. Encashment takes your accumulated earned leave, converts your monthly salary into a daily rate, and multiplies the two:

encashment = (monthly wages ÷ divisor) × encashable leave days

Three choices sit inside that line, and no statute prescribes any of them for private-sector employees. Note the third carefully: whether a cap actually binds depends on whether the OSHWC leave provisions reach you.

Policy variables in a leave encashment calculation
VariableCommon optionsEffect
Wage componentBasic + DA, or full grossGross can roughly double the payout
Divisor30 (calendar) or 26 (working)26 gives about 15% more per day
Cap on daysOften 30, 45, 60 or noneDays above the cap go unpaid under the policy — but for a covered worker the Code prescribes no maximum, so the cap is contestable

Three worked examples

1. The standard case

Anita has ₹60,000 of Basic + DA, twelve completed years of service and 45 days of unused earned leave. Her policy encashes on Basic + DA and divides by 30.

  • Per-day rate: ₹60,000 ÷ 30 = ₹2,000
  • Encashment: 45 × ₹2,000 = ₹90,000

All of it is exempt — but check why, because the reason is not the ₹25 lakh ceiling. Section 10(10AA)(ii) takes the least of: ₹90,000 received; ten months' average salary, ₹6,00,000; the value of her eligible leave, 45 days (well inside the 30-days-per-completed-year limit of 360) × ₹2,000 = ₹90,000; and ₹25,00,000. The lowest is ₹90,000 — what she actually received — so nothing is taxable. Had she held 400 days against twelve years of service, the 30-day-per-year limb would have cut the eligible days to 360 and capped the exemption below her payout.

2. The same person, a 26-day divisor

Identical facts, but her policy divides by 26 instead.

  • Per-day rate: ₹60,000 ÷ 26 = ₹2,308
  • Encashment: 45 × ₹2,308 = ₹1,03,846

₹13,846 more for exactly the same service and balance. This is why the divisor is worth finding in the policy document.

3. Hitting a policy cap

Same salary and 45 days held, but the policy caps encashment at 30 days.

  • Days paid under the policy: 30 (not 45)
  • Encashment: 30 × ₹2,000 = ₹60,000
  • Days the policy treats as lapsing: 15

₹30,000 turns on that cap — and whether the cap actually binds depends on Anita's classification. If she is a covered worker, the OSHWC Code prescribes no maximum on encashment and entitles her on separation to the leave standing to her credit, so the 30-day cap is her employer's policy rather than a statutory ceiling and is worth putting in writing before she accepts it. If she is managerial, or a supervisor above ₹18,000 a month, the policy cap governs — subject to anything more favourable in her State's Shops and Establishments Act. Either way, if she still has notice to serve, taking those 15 days as leave beats losing them, provided leave does not push her last working day out.

Take the leave, or encash it?

This is the decision the number above is actually for, and the answer turns on one thing: does your employer extend your last working day for leave taken during notice?

If it extends the LWD

Taking leave does not shorten the notice you serve — it moves your exit later and spends a balance that would have been paid out. You get rest, not time.

If it does not

Your exit date holds, so the days are genuinely saved. The trade is real: time off now against the payout later.

Either way, if your employer says days above a cap will go unpaid, taking them beats losing them — and if you are a covered worker, ask which provision the cap rests on before you assume it stands. Work out what taking leave does to your last working day.

The ₹25 lakh figure is a ceiling, not an exemption

A great deal of guidance says leave encashment is “tax-free up to ₹25 lakh”. That reads as though ₹25 lakh arrives automatically. It does not. For a non-government employee, section 10(10AA)(ii) exempts encashment received on retirement or resignation at the least of four amounts, and ₹25 lakh is only the fourth:

  1. 1The encashment you actually received. You cannot exempt more than you were paid.
  2. 2Ten months' average salary. Basic + DA averaged over the ten months immediately before you left.
  3. 3The cash value of your eligible unused leave. Counted at no more than 30 days for each completed year of service — so a long-accumulated balance is cut back to that limit before it is valued.
  4. 4₹25,00,000. Raised from ₹3 lakh by CBDT Notification No. 31/2023 dated 24 May 2023, effective 1 April 2023. A lifetime aggregate across every employer, not a fresh allowance at each exit.

On ordinary salaries the second or third limb binds long before ₹25 lakh comes into view. Two other points decide the answer before the arithmetic does: a government employee is wholly exempt under section 10(10AA)(i), and encashment taken while still in service is fully taxable as salary whoever you work for — section 10(10AA) applies only on retirement or resignation.

This page stops at the gross figure on purpose. The tax on exit payments calculator runs the full least-of test on your own numbers, alongside gratuity and the rest of your settlement, and tells you which limb actually bound.

Related tools

Leave during noticeTake it or bank it — what each does to your exit date.Tax on exit paymentsHow much of your encashment is tax-free.Gratuity calculatorThe other big number in your settlement.India exit checklistEverything you're owed when you leave.

Frequently asked questions

How is leave encashment calculated in India?+
Your unused leave days are multiplied by a per-day rate derived from your monthly salary. The usual formula is (monthly Basic + DA ÷ divisor) × unused earned leave days, where the divisor is 30 or 26 depending on your employer's policy. Unlike gratuity, no statute prescribes that arithmetic for the private sector — the pay component and the divisor come from your leave policy, which is why two people with identical salaries and balances can receive different amounts. That is a point about the formula, not about the entitlement. If you count as a worker under the OSHWC Code, 2020, the right to encash is statutory: the Ministry of Labour & Employment's Additional FAQs on the Labour Codes (as on 16.03.2026, Q26) state that at the time of separation the worker is entitled to encash the leave standing to their credit, and that no maximum limit is prescribed under the Code.
Is leave encashment 30 days or 26 days?+
Both are used and your leave policy decides. A divisor of 30 treats the month as calendar days and is the most common private-sector convention; 26 treats it as working days and produces a per-day rate about 15 per cent higher. On ₹60,000 of Basic + DA, dividing by 30 gives ₹2,000 a day while dividing by 26 gives ₹2,307. Across a 45-day balance that is a difference of nearly ₹14,000, so it is worth checking the policy rather than assuming.
Which leave is encashed when you leave a job?+
Earned leave, also called privilege leave, is normally the only type paid out. Casual leave and sick leave typically lapse rather than being encashed. Many policies also cap the number of days that can be encashed. Whether that cap actually binds depends on who you are: for a worker covered by the OSHWC Code, 2020, the Code prescribes no maximum limit on encashment and the entitlement on separation is to the leave standing to your credit, so a policy cap is your employer's position rather than a statutory ceiling and is worth challenging in writing. For managerial and administrative staff, and supervisors earning above ₹18,000 a month, the cap in the policy — read together with any standing orders and your State's Shops and Establishments Act — is generally what governs. Check both the eligible leave type and your own classification before you plan around a figure.
Is leave encashment taxable in India?+
Partly, and the ₹25 lakh figure is a maximum, not an automatic exemption. For a non-government employee, section 10(10AA)(ii) exempts encashment received on retirement or resignation at the LEAST of four amounts: the encashment actually received; ten months' average salary (basic + DA over the last ten months); the cash value of unused leave counted at no more than 30 days for each completed year of service; and ₹25 lakh. CBDT Notification No. 31/2023 dated 24 May 2023 raised that last figure from ₹3 lakh with effect from 1 April 2023, but it is only the fourth limb — on ordinary salaries one of the first three binds long before it. It is also a lifetime ceiling across every employer you ever have, not a fresh limit at each exit, so encashment exempted earlier reduces the headroom available now. Government employees are wholly exempt under section 10(10AA)(i), and encashment taken while still in service is fully taxable as salary whoever you work for.
Should I take my leave or encash it?+
It depends on whether your employer extends your last working day for leave taken during notice. If it does, taking leave does not shorten the notice you serve — it moves your exit later and spends a balance that would otherwise have been paid to you. If it does not extend the LWD, taking leave genuinely saves you working days at the cost of the payout. Work out which applies before you decide.
What happens to unused leave above the encashment cap?+
Under the policy, it is normally treated as lapsing without payment — but do not take that as settled if you are a covered worker. The OSHWC Code, 2020 prescribes no maximum on encashment, and on separation a covered worker is entitled to encash the leave standing to their credit (MoLE Additional FAQs, 16.03.2026, Q26). A cap of 30 days against a 45-day balance is then your employer's policy position, not a statutory ceiling, and asking in writing which provision they rely on costs nothing. Where the OSHWC leave provisions genuinely do not reach you — managerial and administrative staff, or supervisors above ₹18,000 a month — the cap in the policy governs, subject to anything more favourable in your State's Shops and Establishments Act. Either way, if you still have notice to serve, using the excess days as leave beats watching them expire — though check first whether taking leave pushes your last working day out, because that changes the calculation.

Sources for the figures on this page

  • Income-tax exemption ceiling on leave encashment at retirement/resignation for non-government employees (lifetime, across all employers)

    Income-tax Act 1961, s.10(10AA)(ii); CBDT Notification No. 31/2023 dated 24 May 2023, effective 1 April 2023

    View sourceChecked 2026-08-11

  • Monthly wage up to which a supervisor is still covered by the OSHWC leave provisions

    MoLE Additional FAQs on Labour Codes (16.03.2026), Q20 — leave provisions apply to workers, and to supervisors whose wage does not exceed Rs 18,000 per month

    View sourceChecked 2026-08-13

  • Days of leave a covered worker may carry to the next calendar year

    MoLE Additional FAQs on Labour Codes (16.03.2026), Q21 — up to 30 days carried forward; leave applied for and refused carries forward without limit

    View sourceChecked 2026-08-13

  • Maximum leave a covered worker may encash under the OSHWC Code — none prescribed

    MoLE Additional FAQs on Labour Codes (16.03.2026), Q26 — no prescribed maximum limit; on separation the worker is entitled to encash the leave to their credit

    View sourceChecked 2026-08-13

  • An employee keeps a more favourable State law benefit despite the Code prevailing on inconsistency

    MoLE Additional FAQs on Labour Codes (16.03.2026), Q25

    View sourceChecked 2026-08-13

Deepak Middha, Founder of LayoffNext

Written and reviewed by Deepak Middha, Chartered Accountant (ICAI, India) and founder of LayoffNext.

Legal and tax positions last checked 14 August 2026Editorial standards
Deepak Middha, Founder of LayoffNext
Deepak MiddhaFounder of LayoffNext

Deepak Middha is the founder of LayoffNext and a Chartered Accountant (ICAI, India). A U.S. immigrant with nearly 20 years of experience — and 17 years in hedge fund and private equity administration, including as Vice President of Fund Accounting at NAV Fund Administration Group and Associate Director of Private Equity and Real Estate at SS&C Technologies — he builds free, plain-language layoff tools and guides for employees, H-1B workers, and immigrant families.

Updated August 14, 2026
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