Leave Encashment Calculator
Calculate leave encashment & tax exemption under Section 10(10AA)
Understanding Leave Encashment & Tax Rules
Government Employees
Fully exempt at retirement. No upper limit. Includes Central Govt, State Govt, and local authorities. No TDS deducted by employer.
Private Employees
Exempt up to ₹25 lakh (enhanced in 2023 Budget). The exemption is the minimum of four limits under Section 10(10AA).
During Service
Leave encashment while still employed (not at retirement/resignation) is fully taxable for both govt and private employees.
Four Limits (Private)
Exemption = least of: (1) Actual amount received, (2) ₹25 lakh, (3) 10 months' average salary, (4) Cash equivalent of eligible leave (30 days × years of service).
TDS & Form 16
Employer adds taxable leave encashment to salary and deducts TDS. It appears in Part B of Form 16 and must be reported in ITR.
Planning Tip
If you have accumulated leave, it may be better to encash at retirement rather than during service to maximise your tax exemption.