Leave Encashment Calculator
A leave encashment calculator works out the payout for unused leave days. Enter the monthly Basic + Dearness Allowance, the number of leave days to encash and the days basis to see the leave encashment amount and per-day value.
Basic salary plus dearness allowance.
Most employers use 30; some use 26 working days.
At a glance
How the leave encashment calculator works
- 1 Enter the monthly Basic salary plus Dearness Allowance (the components most policies use for encashment).
- 2 Enter how many unused leave days are being encashed.
- 3 Choose the days basis your employer uses (30 calendar days or 26 working days).
- 4 The calculator returns the per-day value and the total payout.
Per-day value = Monthly (Basic + DA) ÷ Days basis. Leave encashment = Per-day value × Leave days encashed.
Worked example
An employee leaves with 24 days of unused earned leave. Their monthly Basic plus Dearness Allowance is 45,000, and the employer policy encashes leave on a 26 working-day month.
- ·Monthly Basic + DA: 45,000
- ·Leave days to encash: 24
- ·Days basis: 26
- 1. Per-day value = 45,000 ÷ 26 = 1,730.77
- 2. Encashment = 1,730.77 × 24 = 41,538.46
- 3. As a share of monthly pay = 41,538 ÷ 45,000 = 0.92 months
Leave encashment 41,538 — about 0.92 of a month of Basic + DA.
The days basis is worth more than it looks. On a 30-day basis the same 24 days would pay 36,000 — a difference of 5,538, or 15%, from one line in a policy document. Check which basis your policy actually specifies before quoting a figure. Note too that this is calculated on Basic + DA, not gross: an employee whose allowances make up half their package will find the payout smaller than they expect.
Frequently asked questions
How is leave encashment calculated?
The common formula is: (Monthly Basic + DA ÷ days basis) × number of leave days encashed. The days basis is usually 30 (calendar days) or 26 (working days), depending on your employer's policy.
Is leave encashment taxable?
It depends on jurisdiction and whether it is paid during service or at retirement. In many places, encashment during employment is taxable as salary, while retirement encashment may be partly or fully exempt up to a limit. Check local rules or your payroll team.
Which salary components are used for leave encashment?
Most policies use Basic salary plus Dearness Allowance (DA). Some include other fixed allowances. Confirm which components your organisation's leave policy specifies.
Should I use 26 or 30 days as the basis?
Use whatever your employment contract or leave policy states. 30 treats every calendar day equally; 26 reflects typical working days in a month and yields a slightly higher per-day value.
Should the days basis be 26 or 30?
Whatever your employment contract or leave policy states — there is no universal answer, and the difference is material. Thirty treats every calendar day as payable and gives a lower per-day rate; 26 reflects working days after weekly rest and gives a rate about 15% higher. If the policy is silent, most Indian employers default to 30 for encashment, but the contract governs and it is worth getting written confirmation.
Which salary components count for leave encashment?
Most policies use Basic plus Dearness Allowance only, which is why this calculator asks for that rather than gross. Some employers include fixed allowances such as HRA or a special allowance; very few include variable pay. Since allowances often make up 40 to 60% of a package, the component definition changes the payout far more than the number of days does.
Is leave encashment taxable?
It depends on when it is paid and where you are. In India, encashment received while still in service is fully taxable as salary. Encashment on retirement or resignation is exempt for government employees, and for others is exempt up to a statutory ceiling under section 10(10AA) with the balance taxable. Other jurisdictions treat accrued leave payouts as ordinary employment income. Confirm with payroll before promising a net figure.
Is there a cap on how much leave can be encashed?
Usually yes, set by policy rather than statute: many employers cap the encashable balance, restrict encashment to the earned or privilege leave category, and exclude sick and casual leave entirely. Some allow encashment only at exit and not during service. Check the leave rules for both the cap and the eligible categories before calculating a balance.
How does leave encashment fit into a full and final settlement?
It is one component of it, alongside unpaid salary for the final month, gratuity where service qualifies, and any pending bonus, less recoveries and tax. If you are working out an exit payment in full rather than just the leave line, the full and final settlement calculator handles all of those together and applies the right statutory rules for the country.