The number depends on a basis your policy may not state
Calculate payment for accumulated leave on basic plus DA, and understand why the day basis your policy uses changes the answer by around 15%.
Leave encashment calculator
Payment for accumulated leave, computed on basic plus DA at a 26-day month.
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The Formula
Basic plus DA divided by the day basis, multiplied by the days being encashed.
26 Or 30
The day basis changes the answer by roughly 15%. Most policies use 26; some use 30.
The Real Risk
The leave balance itself. Encashment is only as reliable as the register behind it.
How encashment is calculated
Leave encashment is the accumulated leave balance multiplied by a per-day rate, and the per-day rate is basic plus dearness allowance divided by the number of days your policy treats as a month.
This calculator uses 26 days, which is the most common basis. Some policies use 30. The difference is not trivial: on the same salary and the same balance, the 26-day basis pays about 15% more than the 30-day basis.
If your policy does not state which basis applies, that ambiguity will be resolved during an argument at somebody's exit.
Tax, and the thing that actually goes wrong
During service, encashment is fully taxable as salary. There is no exemption for cashing out leave while still employed.
At retirement or resignation, an exemption is available subject to a ceiling and a formula based on average salary and accumulated leave, with government employees treated more generously.
But the tax treatment is the easy part. The difficult part is the leave register. Encashment is computed straight from the accumulated balance, so the payment is only as reliable as the record behind it — and registers drift in predictable ways: leave taken but never recorded, accrual that continued through unpaid absence, carry-forward caps configured after balances had already exceeded them.
Because encashment falls due at exit, drift surfaces at the worst possible moment. Reconcile the register before computing, and be able to show the accrual history rather than only the closing number.
Leave encashment calculator FAQs
Should we use 26 days or 30?
Either is defensible; 26 is more common. What matters is that your policy states which, and that payroll applies what the policy says. The dispute is nearly always about the mismatch.
Is leave encashment taxable?
Fully taxable during service. At retirement or resignation an exemption applies, subject to a ceiling and a prescribed formula.
Which leave types can be encashed?
Typically earned or privilege leave. Casual and sick leave are usually lapsing rather than encashable, though the position depends on your policy and the applicable state Act.
Which salary is used for encashment?
Usually basic plus dearness allowance, as with most terminal payments — not gross. Encashing on gross is a common and expensive error, and it is very hard to claw back once it has been paid.
Do we have to encash unused leave every year?
Your policy decides, within the limits the applicable Act sets on carry-forward and accumulation. What you cannot do is let leave accumulate beyond the cap and then refuse to recognise it.
Is encashment taxable?
During employment it is generally taxable; on retirement or resignation the treatment differs and exemptions may apply, with different rules for government and other employees. Do not apply one rule to both situations.
Stop calculating this one employee at a time
Klok computes this on every payroll run, for every employee, from your own attendance and salary data — with the working shown.