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Unused earned leave is paid as encashment on retirement, resignation, or year-end. Calculate amount + tax-exempt portion.
Updated:Encashment = (Basic + DA) ÷ 30 × leave days. Tax cap ₹25L for non-govt; unlimited for govt.
Companies typically encash unused earned leave at retirement, resignation, or end of the calendar year (carry-forward cap).
Monthly Basic + DA divided by 30. (Some companies use ÷26, check policy.)
per_day = (basic + da) ÷ 30Per-day rate × unused leave days = gross encashment.
encashment = per_day × leave_days
Government employees: fully tax-free. Private: tax-free up to ₹25L (lifetime cap), rest taxable.
exempt = min(amount, 2500000)
taxable = amount − exemptEncashment = (Basic + DA) ÷ 30 × Unused Leave DaysTax exemption: ₹25L lifetime cap for private employees (Section 10(10AA)); unlimited for govt.Tax exemption: ₹25 lakh lifetime cap for non-government employees.
Leave provisions and statutory carry-forward rules.
Industry-standard leave encashment formula and tax adjustment.
Tax treatment for govt vs private sector and Form 16 reporting.
Leave policy structures used by Indian HR teams.
Section 10 exemption circulars and clarifications.
Superworks payroll auto-tracks leave balances, accumulation, and computes encashment with correct tax treatment — on full-and-final or year-end.
