Leave encashment calculator: how much is tax-free?
Cashing in leave when you resign or retire? See the tax-free part under the ₹25 lakh limit, and what's added to your taxable salary.
- ₹25 lakh limit
- Both regimes
- Free, no sign-up
Leaving your job? Check your settlement
Our experts check the leave encashment, gratuity and notice pay in your full and final settlement, and how each is taxed.
Questions people often ask
I'm resigning, not retiring. Is my leave encashment still tax-free?
Yes. Resigning counts as retirement for this rule, so the same limits apply.
My employer deducted TDS on all of it. Can I get some back?
Often, yes. If part was tax-free, you can claim it in your return and get the extra TDS refunded.
How leave encashment is taxed
It depends on when you cash in your leave.
| When | Tax |
|---|---|
| While you're working | Fully taxable |
| On resigning or retiring, government job | Tax-free |
| On resigning or retiring, other employers | Tax-free up to a limit |
| Paid to the family after death | Tax-free |
The limit for private and PSU employees
- The amount you received.
- Your unused earned leave × average salary ÷ 30. Leave counts at no more than 30 days a year.
- 10 months' average salary.
- ₹25 lakh for your whole working life.
Tax-free is the lowest of the four. "Salary" is basic plus DA, averaged over your last 10 months.
Last reviewed 8 October 2026. The rules in this calculator come from these official sources.
- Taxability of retirement benefits Income Tax Department
- Leave encashment limit raised to ₹25 lakh (Notification 31/2023) Central Board of Direct Taxes
Common questions
Is leave encashment taxable?
Leave you cash in while you're still working is fully taxable, like salary. Leave you cash in when you resign or retire is tax-free up to a limit. Government employees pay no tax on it at retirement.
How much leave encashment is tax-free?
For non-government employees, the least of: the amount you received, your unused earned leave valued at your average salary, 10 months' average salary, and ₹25 lakh. Unused leave is counted at no more than 30 days for each year you worked there.
Is the ₹25 lakh limit per employer?
No. It's for your whole working life. Anything exempted when you left an earlier job reduces what's left.
Does resigning count, or only retiring?
Resigning counts. The rule covers retirement whether on superannuation or otherwise, which includes resignation.
Which salary is used for the average?
Basic pay plus DA (if it counts for retirement benefits) plus any commission paid as a fixed percentage of turnover, averaged over the 10 months before you leave. HRA and other allowances aren't included.
Is leave encashment tax-free under the new regime?
Yes. The exemption works the same way under both regimes.
What happens to leave encashment paid after an employee's death?
It's paid to the family and is fully tax-free.
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