Leave Encashment Calculator
How to Use:
- Enter your Monthly Basic Pay in INR.
- Enter your Balance Earned Leave in Days.
- Click on Calculate to get the Leave Encashment Amount.
- You can Download PDF of your result for future reference.
Formula: (Basic Pay ÷ 30) × No. of Earned Leave Days
As per: Indian Government & Income Tax Act Section 10(10AA) rules.
Leave Encashment – Everything You Need to Know
Leave encashment refers to the process where an employee can convert their unused earned leaves into monetary compensation. This benefit is typically provided by employers to ensure that employees are compensated for leaves they have earned but could not utilize during their tenure.
According to the Government of India, leave encashment during service is taxable under the Income Tax Act. However, certain exemptions apply at the time of retirement or resignation, as mentioned in Section 10(10AA) of the Act. These rules vary for government and private employees.
How Leave Encashment is Calculated?
The formula for calculating leave encashment is: (Basic Salary ÷ 30) × No. of Earned Leave Days. This means the monthly basic pay is divided by 30 to determine the daily wage, which is then multiplied by the number of leaves to get the total encashment amount.
Taxation Rules on Leave Encashment
For government employees, leave encashment at retirement is fully exempt from tax. For non-government employees, the exemption limit is up to ₹3,00,000 under Section 10(10AA). The balance amount, if any, is taxable as per the individual’s income tax slab.
Why is Leave Encashment Important?
Leave encashment acts as a financial cushion for employees and serves as a reward for those who do not utilize all their earned leaves. It ensures that employees are fairly compensated for their commitment and hard work.
Final Thoughts
Employees should keep track of their leave balance and understand their organization’s policy for leave encashment. Using this calculator can help estimate the amount and plan finances better.
Always consult your HR or finance department for exact calculations as company policies may differ.