Calculate your leave encashment in a click! Know the detailed Leave encashment received from your employer.
| Particulars | Amount |
|---|---|
| Last drawn Basic Salary + DA | ₹ 0 |
| Unutilised leave after retirement | 0 leave |
| Leave Encashment recieved | ₹ 0 |
The leave encashment calculator is an online tool. It helps you determine the exempted and taxable leave salary for income tax purposes. The calculator determines how much an employee can receive for accrued but unused leave and checks its taxable amount. This calculator simplifies the process and eliminates manual errors.
Leave encashment refers to the payment employees receive for their unused leaves. It typically forms part of the Full and Final Settlement (FnF) during resignation or retirement.
Encashment means these leaves can be converted into monetary benefits when an employee:
Type of Leave | Description | Encashment Eligibility |
Casual Leave | Short-term leave used for personal reasons. | Often eligible for encashment, varies by company. |
Privilege Leave | Pre-approved leave for personal or professional purposes. | Eligible after a certain period. |
Medical Leave | Leave taken for health reasons. | Short-term leaves may be encashed; long-term are not. |
Sabbatical Leave | Paid leave for skill development through courses or certifications. | Often reimbursed and eligible for encashment. |
Holiday Leaves | Paid leaves for holidays declared by the organization. | Generally eligible for encashment. |
Maternity Leaves | Leave for pregnant employees, spanning 12-26 weeks. Extended leaves are not eligible for encashment. | Standard leave period is paid and encashable. |
Let us understand each of these types of leaves in detail:
Casual Leaves are the most commonly used leaves by the employees. The duration of these leaves provided to the employees varies from organization to organization but there is a minimum of 7 to 10 days. If casual leave is accepted for encashment your leave will be eligible for leave encashment.
A privilege leave is a leave type which can be availed prior to the information provided by the employee and they are eligible for leave encashment after a certain period of time. Encashment of this kind of leaves varies from organization to organization.
Employees can avail of these kinds of leaves when they are incompetent at work due to their bad health conditions. Once sanctioned by the employer it can be possible to encash the medical leaves. Long-term medical leaves are not eligible for encashment and the number of these kinds of leaves provided varies from company to company.
These kinds of leaves are provided to the employees to expand their knowledge. These can be done through several courses and certifications. Sabbatical leaves are paid and the organization reimburses them, and are considered for leave encashment.
These kinds of leaves are also paid leaves and no amount is deducted from the employee’s salary. They are also eligible for leave encashment.
Maternity leave is available to all pregnant female employees during their term of employment. The span of maternity leave varies from 12 weeks to 26 weeks. Maternity leave can be extended but these extended leaves are not eligible for payment. The leave period varies from organization to organization.
The Leave encashment formula is as follows:
Leave Encashment = Unused Leave Days × Daily Salary
Daily Salary = (Basic Salary + Dearness Allowance) ÷ 30
Mr. X is retiring after “15 years” of service.
Daily Salary = ₹30,000 ÷ 30 = ₹1,000
Leave Encashment = 175 days × ₹1,000 = ₹1,75,000
The leave encashment calculator simplifies the process.
Step 1: Enter the basic salary and dearness allowance.
Step 2: Enter the number of earned leaves available.
Step 3: The calculator displays the amount of leave encashment.
Leave encashment is taxable, but the tax implications can vary based on the type of employee and the circumstances under which the leave encashment is received. For government employees, leave encashment is fully exempt from tax, providing a significant benefit at the time of retirement.Â
On the other hand, for private employees, leave encashment is partially taxable. The current tax exemption limit for private employees is set at ₹25,00,000. To claim tax relief, private employees can utilize Section 89 of the Income Tax Act and must fill out Form 10E. Understanding these tax implications can help employees plan better for their financial future and make informed decisions about their leave encashment.
Under Section 10 AA of the Income Tax Act, earned leave encashment cannot exceed 30 days for every year of service. Taxability depends on:
When any kind of leave is encashed by the employee one can avail certain partial and full exemptions. The conditions of exemptions are:
This tool makes sure that employees receive the correct amount for their unused leave. Thus, promoting transparency and satisfaction in workplace settlements.
A leave encashment policy is a set of guidelines established by a company to compensate employees for their unused paid leaves. This policy outlines the rules and procedures for leave encashment, including which types of leaves can be encashed, how the leave encashment calculation is done, and the tax implications involved.Â
Understanding your company’s leave encashment policy is crucial for effective leave and financial planning. Each organization may have different rules, so it’s important to be aware of your specific company’s policy to make the most of your leave benefits.
In order to calculate the leave encashment you can use the formula
(Basic Salary+ Dearness Allowance)/30* Number of Earned LeavesÂ
First, add the Basic salary and Dearness Allowance, then divide the sum by 30. Next, multiply the quotient by the number of days of Earned Leave, which should not exceed 300 days.
You can either encash or clear your annual leave if your employment was terminated. If the unused leave is encashed, it should be calculated at the gross rate of pay based on your last drawn salary.
