Find the gross amount for cashing out unused leave.
Your daily salary rate is multiplied by the number of leave days being encashed.
Amount: Daily salary × leave days
Leave encashment is money paid in place of earned leave you did not take. Most Indian employers let employees carry forward a set number of privilege or earned leave days, and pay for the balance either at year end, when the balance exceeds a cap, or when the employee resigns or retires. The leave encashment calculator multiplies your daily salary by the number of days being encashed to give the gross payout.
The daily salary is usually defined on basic plus dearness allowance, not on gross pay, and is typically monthly basic plus DA divided by 30 or by 26 depending on company policy. Employees use this tool while serving notice to estimate their full and final settlement, while planning whether to take leave or bank it, and while comparing the value of leave policies across employers.
1. Check your leave balance on the HR portal and the number of days the policy allows you to encash.
2. Find the salary base for encashment in your policy, usually monthly basic plus DA.
3. Convert to a daily rate: Daily salary = Monthly (basic + DA) ÷ divisor, where the divisor is 30 or 26 as your policy states.
4. Encashment = Daily salary × Leave days encashed.
5. For the net amount, deduct TDS at your slab rate, because encashment during service is taxed as salary.
The same monthly salary gives different daily rates depending on the divisor. ₹52,000 ÷ 30 is about ₹1,733 a day, while ₹52,000 ÷ 26 is ₹2,000. The 30-day convention treats every calendar day as paid. The 26-day convention treats a month as 26 working days, excluding weekly offs, which is also the basis used for gratuity. Neither is universal. Your appointment letter or leave policy decides, and it can change the payout by more than 15% for the same leave balance.
Encashment during service, for example selling excess leave at year end, is added to salary and taxed at your slab rate like any other pay. Encashment at retirement or resignation is treated differently for tax. Government employees receive it fully exempt, while non-government employees receive an exemption up to limits set in the Income Tax Act, based on average salary and months of leave. The calculator gives the gross amount in both cases; the tax treatment decides how much of it you keep.
Leave encashment is a function of the salary you draw on the date of encashment, not the salary when the leave was earned. So a balance of 40 days is worth more after an increment than before it. The base is usually narrow: basic plus DA, sometimes plus a fixed commission, but rarely HRA or special allowance. This keeps the cost predictable for employers. If your structure has a low basic, encashment is correspondingly small, which is one of the hidden effects of low-basic salary structures.
Deepa is serving notice at a Kochi bank branch. Her daily rate on basic plus DA is ₹1,850 under the bank's policy, and she has 22 unused earned leave days that can be encashed.
Answer: Leave encashment amount ₹40,700
Using gross monthly salary instead of basic plus DA to find the daily rate.
Using the wrong divisor, 30 instead of 26 or the reverse, for your employer's policy.
Encashing more days than the policy cap allows; excess days usually lapse.
Assuming exit encashment is fully tax-free for a private-sector employee.
Estimating a full and final settlement before the last working day.
Deciding whether to take a long holiday or carry leave forward.
Payroll teams computing year-end encashment of excess leave.
Comparing the real value of leave policies between two employers.
Is leave encashment taxable?
It depends on whether you cash it out while working or at retirement, and whether you work for the government or a private company. The tax rules are quite different in each case.