{"id":4220,"date":"2024-12-05T11:26:42","date_gmt":"2024-12-05T11:26:42","guid":{"rendered":"https:\/\/www.hirist.tech\/blog\/?p=4220"},"modified":"2025-03-10T11:54:37","modified_gmt":"2025-03-10T11:54:37","slug":"leave-encashment-rules-tax-exemptions-limit-calculation-formula-more","status":"publish","type":"post","link":"https:\/\/www.hirist.tech\/blog\/leave-encashment-rules-tax-exemptions-limit-calculation-formula-more\/","title":{"rendered":"Leave Encashment Rules: Tax Exemptions Limit, Calculation Formula &amp; More"},"content":{"rendered":"\n<p>Did you know that the money you receive for unused leave could be partially tax-free?&nbsp;Leave encashment is a valuable perk provided by employers, but many employees are unsure about its rules and tax exemptions.&nbsp;<\/p>\n\n\n\n<p>Understanding how it works can help you make the most of this benefit. Whether you work in the private or public sector, knowing the calculation formula, tax-free limits, and other key details can save you money and hassle.&nbsp;<\/p>\n\n\n\n<p>In this blog, we\u2019ll explain everything about leave encashment in simple terms so you can manage your finances better.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_65 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title \" >Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.hirist.tech\/blog\/leave-encashment-rules-tax-exemptions-limit-calculation-formula-more\/#What_is_Leave_Encashment\" title=\"What is Leave Encashment?\">What is Leave Encashment?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.hirist.tech\/blog\/leave-encashment-rules-tax-exemptions-limit-calculation-formula-more\/#Leave_Encashment_Policy_in_India\" title=\"Leave Encashment Policy in India\">Leave Encashment Policy in India<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.hirist.tech\/blog\/leave-encashment-rules-tax-exemptions-limit-calculation-formula-more\/#What_are_the_Different_Types_of_Leaves\" title=\"What are the Different Types of Leaves?&nbsp;\">What are the Different Types of Leaves?&nbsp;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.hirist.tech\/blog\/leave-encashment-rules-tax-exemptions-limit-calculation-formula-more\/#Leave_Encashment_Rules\" title=\"Leave Encashment Rules\">Leave Encashment Rules<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.hirist.tech\/blog\/leave-encashment-rules-tax-exemptions-limit-calculation-formula-more\/#Eligibility_for_Leave_Encashment\" title=\"Eligibility for Leave Encashment\">Eligibility for Leave Encashment<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.hirist.tech\/blog\/leave-encashment-rules-tax-exemptions-limit-calculation-formula-more\/#Employer_Discretion\" title=\"Employer Discretion\">Employer Discretion<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.hirist.tech\/blog\/leave-encashment-rules-tax-exemptions-limit-calculation-formula-more\/#Is_Leave_Encashment_Taxable\" title=\"Is Leave Encashment Taxable?\">Is Leave Encashment Taxable?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/www.hirist.tech\/blog\/leave-encashment-rules-tax-exemptions-limit-calculation-formula-more\/#Taxation_of_Leave_Encashment\" title=\"Taxation of Leave Encashment\">Taxation of Leave Encashment<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/www.hirist.tech\/blog\/leave-encashment-rules-tax-exemptions-limit-calculation-formula-more\/#Encashment_of_Earned_Leave_during_Employment_Period\" title=\"Encashment of Earned Leave during Employment Period\">Encashment of Earned Leave during Employment Period<\/a><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/www.hirist.tech\/blog\/leave-encashment-rules-tax-exemptions-limit-calculation-formula-more\/#Taxability\" title=\"Taxability\">Taxability<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/www.hirist.tech\/blog\/leave-encashment-rules-tax-exemptions-limit-calculation-formula-more\/#Tax_Relief_Under_Section_89\" title=\"Tax Relief Under Section 89\">Tax Relief Under Section 89<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/www.hirist.tech\/blog\/leave-encashment-rules-tax-exemptions-limit-calculation-formula-more\/#Steps_to_Claim_Tax_Relief\" title=\"Steps to Claim Tax Relief\">Steps to Claim Tax Relief<\/a><\/li><\/ul><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/www.hirist.tech\/blog\/leave-encashment-rules-tax-exemptions-limit-calculation-formula-more\/#Leave_Encashment_on_Resignation_or_Retirement\" title=\"Leave Encashment on Resignation or Retirement\">Leave Encashment on Resignation or Retirement<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-14\" href=\"https:\/\/www.hirist.tech\/blog\/leave-encashment-rules-tax-exemptions-limit-calculation-formula-more\/#Leave_Encashment_on_Retirement_for_Government_Employees\" title=\"Leave Encashment on Retirement for Government Employees\">Leave Encashment on Retirement for Government Employees<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-15\" href=\"https:\/\/www.hirist.tech\/blog\/leave-encashment-rules-tax-exemptions-limit-calculation-formula-more\/#Leave_Encashment_Rules_for_Private_Company\" title=\"Leave Encashment Rules for Private Company\">Leave Encashment Rules for Private Company<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-16\" href=\"https:\/\/www.hirist.tech\/blog\/leave-encashment-rules-tax-exemptions-limit-calculation-formula-more\/#Leave_Encashment_Tax_Exemption_Under_Section_1010AA\" title=\"Leave Encashment Tax Exemption Under Section 10(10AA)\">Leave Encashment Tax Exemption Under Section 10(10AA)<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-17\" href=\"https:\/\/www.hirist.tech\/blog\/leave-encashment-rules-tax-exemptions-limit-calculation-formula-more\/#How_Much_Leave_Encashment_is_Tax_Free\" title=\"How Much Leave Encashment is Tax Free?\">How Much Leave Encashment is Tax Free?<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-18\" href=\"https:\/\/www.hirist.tech\/blog\/leave-encashment-rules-tax-exemptions-limit-calculation-formula-more\/#Leave_Encashment_Exemption_in_New_Tax_Regime\" title=\"Leave Encashment Exemption in New Tax Regime\">Leave Encashment Exemption in New Tax Regime<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-19\" href=\"https:\/\/www.hirist.tech\/blog\/leave-encashment-rules-tax-exemptions-limit-calculation-formula-more\/#Section_10_10AA_of_Income_Tax_Act_Leave_Encashment\" title=\"Section 10 10AA of Income Tax Act Leave Encashment\">Section 10 10AA of Income Tax Act Leave Encashment<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-20\" href=\"https:\/\/www.hirist.tech\/blog\/leave-encashment-rules-tax-exemptions-limit-calculation-formula-more\/#Resignation_or_Termination\" title=\"Resignation or Termination\">Resignation or Termination<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-21\" href=\"https:\/\/www.hirist.tech\/blog\/leave-encashment-rules-tax-exemptions-limit-calculation-formula-more\/#Special_Cases\" title=\"Special Cases\">Special Cases<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-22\" href=\"https:\/\/www.hirist.tech\/blog\/leave-encashment-rules-tax-exemptions-limit-calculation-formula-more\/#Leave_Encashment_for_Legal_Heirs\" title=\"Leave Encashment for Legal Heirs\">Leave Encashment for Legal Heirs<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-23\" href=\"https:\/\/www.hirist.tech\/blog\/leave-encashment-rules-tax-exemptions-limit-calculation-formula-more\/#CBDT_Leave_Encashment_Limit\" title=\"CBDT Leave Encashment Limit\">CBDT Leave Encashment Limit<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-24\" href=\"https:\/\/www.hirist.tech\/blog\/leave-encashment-rules-tax-exemptions-limit-calculation-formula-more\/#Leave_Encashment_Exemption_Limit_for_AY_2024-25\" title=\"Leave Encashment Exemption Limit for AY 2024-25\">Leave Encashment Exemption Limit for AY 2024-25<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-25\" href=\"https:\/\/www.hirist.tech\/blog\/leave-encashment-rules-tax-exemptions-limit-calculation-formula-more\/#Leave_Encashment_Calculation_in_India\" title=\"Leave Encashment Calculation in India\">Leave Encashment Calculation in India<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-26\" href=\"https:\/\/www.hirist.tech\/blog\/leave-encashment-rules-tax-exemptions-limit-calculation-formula-more\/#Leave_Encashment_Formula\" title=\"Leave Encashment Formula\">Leave Encashment Formula<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-27\" href=\"https:\/\/www.hirist.tech\/blog\/leave-encashment-rules-tax-exemptions-limit-calculation-formula-more\/#Calculation_of_Leave_Encashment\" title=\"Calculation of Leave Encashment:\">Calculation of Leave Encashment:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-28\" href=\"https:\/\/www.hirist.tech\/blog\/leave-encashment-rules-tax-exemptions-limit-calculation-formula-more\/#Leave_Encashment_on_Basic_or_Gross\" title=\"Leave Encashment on Basic or Gross\">Leave Encashment on Basic or Gross<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-29\" href=\"https:\/\/www.hirist.tech\/blog\/leave-encashment-rules-tax-exemptions-limit-calculation-formula-more\/#Leave_Encashment_Formula_in_Excel\" title=\"Leave Encashment Formula in Excel\">Leave Encashment Formula in Excel<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-30\" href=\"https:\/\/www.hirist.tech\/blog\/leave-encashment-rules-tax-exemptions-limit-calculation-formula-more\/#Leave_Encashment_Calculation_Formula_for_Private_Company\" title=\"Leave Encashment Calculation Formula for Private Company\">Leave Encashment Calculation Formula for Private Company<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-31\" href=\"https:\/\/www.hirist.tech\/blog\/leave-encashment-rules-tax-exemptions-limit-calculation-formula-more\/#Latest_Supreme_Court_Judgement_on_Leave_Encashment\" title=\"Latest Supreme Court Judgement on Leave Encashment\">Latest Supreme Court Judgement on Leave Encashment<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-32\" href=\"https:\/\/www.hirist.tech\/blog\/leave-encashment-rules-tax-exemptions-limit-calculation-formula-more\/#Leave_Encashment_Application\" title=\"Leave Encashment Application\">Leave Encashment Application<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-33\" href=\"https:\/\/www.hirist.tech\/blog\/leave-encashment-rules-tax-exemptions-limit-calculation-formula-more\/#Process_of_Leave_Encashment\" title=\"Process of Leave Encashment\">Process of Leave Encashment<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-34\" href=\"https:\/\/www.hirist.tech\/blog\/leave-encashment-rules-tax-exemptions-limit-calculation-formula-more\/#Accenture_Leave_Encashment\" title=\"Accenture Leave Encashment\">Accenture Leave Encashment<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-35\" href=\"https:\/\/www.hirist.tech\/blog\/leave-encashment-rules-tax-exemptions-limit-calculation-formula-more\/#TCS_Earned_Leave_Encashment\" title=\"TCS Earned Leave Encashment\">TCS Earned Leave Encashment<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-36\" href=\"https:\/\/www.hirist.tech\/blog\/leave-encashment-rules-tax-exemptions-limit-calculation-formula-more\/#Wrapping_Up\" title=\"Wrapping Up\">Wrapping Up<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-37\" href=\"https:\/\/www.hirist.tech\/blog\/leave-encashment-rules-tax-exemptions-limit-calculation-formula-more\/#FAQs\" title=\"FAQs\">FAQs<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-38\" href=\"https:\/\/www.hirist.tech\/blog\/leave-encashment-rules-tax-exemptions-limit-calculation-formula-more\/#Is_there_a_Leave_Encashment_Act_1948\" title=\"Is there a Leave Encashment Act 1948?&nbsp;\">Is there a Leave Encashment Act 1948?&nbsp;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-39\" href=\"https:\/\/www.hirist.tech\/blog\/leave-encashment-rules-tax-exemptions-limit-calculation-formula-more\/#What_are_the_leave_encashment_rules_for_central_government_employees\" title=\"What are the leave encashment rules for central government employees?&nbsp;\">What are the leave encashment rules for central government employees?&nbsp;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-40\" href=\"https:\/\/www.hirist.tech\/blog\/leave-encashment-rules-tax-exemptions-limit-calculation-formula-more\/#What_are_10_days_leave_encashment_rules\" title=\"What are 10 days leave encashment rules?&nbsp;\">What are 10 days leave encashment rules?&nbsp;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-41\" href=\"https:\/\/www.hirist.tech\/blog\/leave-encashment-rules-tax-exemptions-limit-calculation-formula-more\/#Is_leave_encashment_calculation_26_days_or_30_days\" title=\"Is leave encashment calculation 26 days or 30 days?&nbsp;\">Is leave encashment calculation 26 days or 30 days?&nbsp;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-42\" href=\"https:\/\/www.hirist.tech\/blog\/leave-encashment-rules-tax-exemptions-limit-calculation-formula-more\/#What_are_the_DOPT_orders_on_leave_encashment_on_LTC\" title=\"What are the DOPT orders on leave encashment on LTC?&nbsp;\">What are the DOPT orders on leave encashment on LTC?&nbsp;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-43\" href=\"https:\/\/www.hirist.tech\/blog\/leave-encashment-rules-tax-exemptions-limit-calculation-formula-more\/#How_to_submit_an_application_for_LTC_leave_encashment\" title=\"How to submit an application for LTC leave encashment?\">How to submit an application for LTC leave encashment?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-44\" href=\"https:\/\/www.hirist.tech\/blog\/leave-encashment-rules-tax-exemptions-limit-calculation-formula-more\/#Is_leave_encashment_taxable_on_resignation\" title=\"Is leave encashment taxable on resignation?&nbsp;\">Is leave encashment taxable on resignation?&nbsp;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-45\" href=\"https:\/\/www.hirist.tech\/blog\/leave-encashment-rules-tax-exemptions-limit-calculation-formula-more\/#What_is_surrender_leave_encashment\" title=\"What is surrender leave encashment?\">What is surrender leave encashment?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-46\" href=\"https:\/\/www.hirist.tech\/blog\/leave-encashment-rules-tax-exemptions-limit-calculation-formula-more\/#What_is_the_difference_between_gratuity_and_leave_encashment\" title=\"What is the difference between gratuity and leave encashment?\">What is the difference between gratuity and leave encashment?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-47\" href=\"https:\/\/www.hirist.tech\/blog\/leave-encashment-rules-tax-exemptions-limit-calculation-formula-more\/#What_is_the_leave_encashment_exemption_section\" title=\"What is the leave encashment exemption section?&nbsp;\">What is the leave encashment exemption section?&nbsp;<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_Leave_Encashment\"><\/span>What is Leave Encashment?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Let\u2019s start with leave encashment meaning.&nbsp;<\/p>\n\n\n\n<p>Under labour laws, salaried employees are entitled to a certain number of paid leave annually. The unused leave can often be carried forward.&nbsp;<\/p>\n\n\n\n<p>So, basically, leave encashment is a benefit where employees are paid for their unused or accumulated paid leave days.&nbsp;<\/p>\n\n\n\n<ul>\n<li>It usually happens during resignation, retirement, or termination of employment.&nbsp;<\/li>\n\n\n\n<li>This benefit is common in both government and private sector jobs.&nbsp;<\/li>\n\n\n\n<li>The amount you get depends on your salary and the number of unused leave days.&nbsp;<\/li>\n\n\n\n<li>It is important to know that this payment might be taxable &#8211; with some exemptions based on rules.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Leave_Encashment_Policy_in_India\"><\/span>Leave Encashment Policy in India<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>In India, leave encashment policies vary by employer, but they are generally governed by labour laws and company guidelines. The encashment amount is usually calculated based on the employee\u2019s daily salary (basic pay + dearness allowance) and the number of unused leave days. Tax exemptions may apply depending on the amount and the employee\u2019s tenure.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_are_the_Different_Types_of_Leaves\"><\/span>What are the Different Types of Leaves?&nbsp;<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Organizations provide various types of leaves to meet the diverse needs of their employees. Below is a summary of the common leave types and the leaves that can be encashed.&nbsp;<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td><strong>Leave Type<\/strong><\/td><td><strong>Description<\/strong><\/td><td><strong>Eligibility for Encashment<\/strong><\/td><\/tr><tr><td><strong>Casual Leave<\/strong><\/td><td>Short-term leave for personal reasons, usually 7-10 days<\/td><td>Eligibility depends on company policy<\/td><\/tr><tr><td><strong>Medical\/<a href=\"https:\/\/www.hirist.tech\/blog\/sick-leave-email-in-office-templates-samples-examples\/\" target=\"_blank\" rel=\"noreferrer noopener\">Sick Leave<\/a><\/strong><\/td><td>Leave for health-related issues; duration varies by company<\/td><td>Eligible, except for long-term cases<\/td><\/tr><tr><td><strong>Privilege\/Earned Leave<\/strong><\/td><td>Leave earned over time; requires prior notice<\/td><td>Typically eligible as per policy<\/td><\/tr><tr><td><strong>Holiday Leaves<\/strong><\/td><td>Paid leaves granted for public holidays or company-declared holidays<\/td><td>Generally eligible<\/td><\/tr><tr><td><strong>Sabbaticals<\/strong><\/td><td>Extended leave for upskilling or personal development, often reimbursed by the employer<\/td><td>Usually eligible<\/td><\/tr><tr><td><strong><a href=\"https:\/\/www.hirist.tech\/blog\/maternity-leave-application-letter-for-office-with-format-samples\/\" target=\"_blank\" rel=\"noreferrer noopener\">Maternity Leave<\/a><\/strong><\/td><td>Leave for pregnant employees, lasting 12-26 weeks<\/td><td>Not eligible for encashment<\/td><\/tr><tr><td><strong>Compensatory Leave\/Comp Off<\/strong><\/td><td>Leave granted in exchange for working extra hours or holidays<\/td><td>Not eligible<\/td><\/tr><tr><td><strong>Floater Leave<\/strong><\/td><td>Short-term leave on a specific day of the employee\u2019s choice, subject to approval<\/td><td>Eligibility varies by policy<\/td><\/tr><tr><td><strong>National Holiday<\/strong><\/td><td>Leave provided for observing national events<\/td><td>Not eligible<\/td><\/tr><tr><td><strong><a href=\"https:\/\/www.hirist.tech\/blog\/how-to-write-marriage-leave-application-email-to-manager\/\" target=\"_blank\" rel=\"noreferrer noopener\">Marriage Leave<\/a><\/strong><\/td><td>Paid leave specifically for employees getting married<\/td><td>Not eligible<\/td><\/tr><tr><td><strong>Unpaid Leave<\/strong><\/td><td>Leave taken without pay for personal or professional reasons<\/td><td>Not eligible<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Leave_Encashment_Rules\"><\/span>Leave Encashment Rules<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Let\u2019s take a look at the key rules and details regarding leave encashment in India.<\/p>\n\n\n\n<ul>\n<li>Leave encashment during service is <strong>fully taxable<\/strong>, but Section 89 relief is available.<\/li>\n\n\n\n<li>Leave encashment on resignation or retirement is <strong>fully exempt for government employees<\/strong>.<\/li>\n\n\n\n<li>For private employees, exemptions are capped at \u20b925 lakhs under Section 10(10AA).<\/li>\n\n\n\n<li>Tax relief for legal heirs is complete, with no tax deduction applicable.<\/li>\n\n\n\n<li>Employees should use <strong>Form 10E<\/strong> to claim relief for leave encashment under Section 89.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Eligibility_for_Leave_Encashment\"><\/span>Eligibility for Leave Encashment<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul>\n<li>Employees are generally entitled to encash leave that remains unused at the time of resignation, retirement, or termination.<\/li>\n\n\n\n<li>Some companies allow encashment of leave during the employment, though the rules may differ from one organization to another.<\/li>\n\n\n\n<li>Only certain types of leave (like casual, privilege, and earned leave) are eligible for encashment. Maternity leave, national holidays, and unpaid leave are usually not eligible.<\/li>\n<\/ul>\n\n\n\n<pre class=\"wp-block-verse\"><strong>Also Read - <a href=\"https:\/\/www.hirist.tech\/blog\/privilege-leave-meaning-calculation-encashment-rules-in-india\/\" target=\"_blank\" rel=\"noreferrer noopener\">Privilege Leave: Meaning, Calculation, Encashment Rules in India<\/a><\/strong><\/pre>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Employer_Discretion\"><\/span>Employer Discretion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul>\n<li>Companies may have different policies regarding the encashment of leaves during employment, with some allowing encashment of leave at regular intervals (e.g., annually).<\/li>\n\n\n\n<li>The employer can choose to set a cap on the number of leave days that can be encashed in a given year.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Is_Leave_Encashment_Taxable\"><\/span>Is Leave Encashment Taxable?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Yes, leave encashment is taxable depending on when it is received:<\/p>\n\n\n\n<p><strong>During Service:<\/strong> Fully taxable and treated as part of \u201cIncome from Salary.\u201d<\/p>\n\n\n\n<p><strong>On Resignation or Retirement:<\/strong> Taxable, but exemptions apply under Section 10(10AA).<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Taxation_of_Leave_Encashment\"><\/span>Taxation of Leave Encashment<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Now, let\u2019s understand taxation of leave encashment during employment and after retirement or resignation.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Encashment_of_Earned_Leave_during_Employment_Period\"><\/span>Encashment of Earned Leave during Employment Period<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Let\u2019s understand earned leave encashment rules. So, basically, leave encashment received while still employed is fully taxable in India and is classified under &#8220;income from salary.&#8221;&nbsp;<\/p>\n\n\n\n<p>However, relief under Section 89 of the Income Tax Act, 1961, can help lower the tax burden.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Taxability\"><\/span>Taxability<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>The entire leave encashment amount is added to your income and taxed according to your applicable tax slab.&nbsp;<\/p>\n\n\n\n<p>Notably, no exemptions are provided under Section 10(10AA) for leave encashment during employment.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Tax_Relief_Under_Section_89\"><\/span>Tax Relief Under Section 89<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>Relief under Section 89 of Income Tax Act leave encashment can reduce tax liability if the following conditions are met:<\/p>\n\n\n\n<ul>\n<li><strong>Minimum Service:<\/strong> You must have completed at least five continuous years with the same employer before receiving the leave encashment.<\/li>\n\n\n\n<li><strong>Encashment Limit:<\/strong> The leave encashment cannot exceed the salary for the month in which it is received.<\/li>\n<\/ul>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Steps_to_Claim_Tax_Relief\"><\/span>Steps to Claim Tax Relief<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>To avail of the tax benefits under Section 89, you need to follow these steps:<\/p>\n\n\n\n<ol>\n<li>Fill out <strong>Form 10E<\/strong>, which is available on the official e-filing portal of the Income Tax Department.<\/li>\n\n\n\n<li>Submit the completed Form 10E along with your income tax return.<\/li>\n<\/ol>\n\n\n\n<pre class=\"wp-block-verse\"><strong>Also Read - <a href=\"https:\/\/www.hirist.tech\/blog\/monthly-salary-slip-format-and-samples-for-employees-and-employers\/\" target=\"_blank\" rel=\"noreferrer noopener\">Monthly Salary Slip Format and Samples for Employees and Employers<\/a><\/strong><\/pre>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Leave_Encashment_on_Resignation_or_Retirement\"><\/span>Leave Encashment on Resignation or Retirement<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The tax treatment of leave encashment on retirement or resignation in India varies based on whether you are employed in the government or private sector.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Leave_Encashment_on_Retirement_for_Government_Employees\"><\/span>Leave Encashment on Retirement for Government Employees<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Leave encashment received (by central or state government employees) at the time of retirement or resignation is fully exempt from income tax &#8211; irrespective of the amount.<\/p>\n\n\n\n<p>In the event of the employee\u2019s death, the legal heirs can claim the full leave encashment amount &#8211; which is also entirely tax-exempt.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Leave_Encashment_Rules_for_Private_Company\"><\/span>Leave Encashment Rules for Private Company<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>For private sector employees, leave encashment is partially exempt from tax. The exemptions are determined as per Section 10(10AA) of the Income Tax Act.<\/p>\n\n\n\n<ul>\n<li><strong>Exemption limit<\/strong>: As of Budget 2023-24, the maximum exemption allowed is \u20b925 lakhs. Previously, this limit was \u20b93 lakhs.<\/li>\n\n\n\n<li><strong>Taxable portion<\/strong>: Any amount received beyond the exempt limit is taxable and will be added to your income &#8211; with tax applied as per the applicable income tax slab.<\/li>\n<\/ul>\n\n\n\n<pre class=\"wp-block-verse\"><strong>Also Read - <a href=\"https:\/\/www.hirist.tech\/blog\/job-resignation-letter-format-samples-and-examples\/\" target=\"_blank\" rel=\"noreferrer noopener\">Job Resignation Letter Format, Samples and Examples<\/a><\/strong><\/pre>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Leave_Encashment_Tax_Exemption_Under_Section_1010AA\"><\/span>Leave Encashment Tax Exemption Under Section 10(10AA)<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Did you know? Section 10(10AA) provides leave encashment exemption under specific conditions &#8211; varying based on employment type.&nbsp;<\/p>\n\n\n\n<p>Here is a table summarizing the exemption of tax on leave encashment.<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td><strong>Category<\/strong><\/td><td><strong>Tax Treatment<\/strong><\/td><\/tr><tr><td><strong>State and Central Government Employees<\/strong><\/td><td>Fully tax-exempt.<\/td><\/tr><tr><td><strong>Private Sector Employees<\/strong><\/td><td>Partially exempt under Section 10(10AA)(ii); remainder taxable.<\/td><\/tr><tr><td><strong>Legal Heirs of Deceased Employees<\/strong><\/td><td>Fully tax-exempt on the amount received.<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"How_Much_Leave_Encashment_is_Tax_Free\"><\/span>How Much Leave Encashment is Tax Free?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>For private employees, the <strong>maximum leave encashment exemption limit<\/strong> is \u20b925 lakhs &#8211; received upon resignation or retirement. For government employees, the entire amount is tax-free.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Leave_Encashment_Exemption_in_New_Tax_Regime\"><\/span>Leave Encashment Exemption in New Tax Regime<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>The exemption limit of \u20b925 lakhs for private employees applies in both the old and new tax regimes. However, tax benefits under Section 89 are only applicable in the old tax regime.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Section_10_10AA_of_Income_Tax_Act_Leave_Encashment\"><\/span>Section 10 10AA of Income Tax Act Leave Encashment<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Section 10(10AA) provides tax exemptions for leave encashment received on retirement or resignation. For private employees, the exemption amount is calculated based on the least of the four factors mentioned below:<\/p>\n\n\n\n<ul>\n<li>Actual leave encashment amount received.<\/li>\n\n\n\n<li>Average salary for the last 10 months (including basic pay, dearness allowance, and commission).<\/li>\n\n\n\n<li>Cash equivalent of unutilized earned leave (limited to 30 days per year of service).<\/li>\n\n\n\n<li>The prescribed limit of \u20b925 lakhs as per the Finance Budget 2023-24 (earlier \u20b93 lakhs).<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Resignation_or_Termination\"><\/span>Resignation or Termination<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Leave encashment received on resignation or termination is treated as part of salary income and taxed according to the applicable slab rates for both government and private employees.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Special_Cases\"><\/span>Special Cases<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Leave_Encashment_for_Legal_Heirs\"><\/span>Leave Encashment for Legal Heirs<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>In the event of an employee&#8217;s death, any leave encashment received by their legal heirs is fully tax-exempt.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"CBDT_Leave_Encashment_Limit\"><\/span>CBDT Leave Encashment Limit<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>The Central Board of Direct Taxes (CBDT) increased the leave encashment limit for private employees from \u20b93 lakhs to \u20b925 lakhs in the Finance Budget 2023-24.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Leave_Encashment_Exemption_Limit_for_AY_2024-25\"><\/span>Leave Encashment Exemption Limit for AY 2024-25<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>For Assessment Year 2024-25:<\/p>\n\n\n\n<ul>\n<li>Government employees enjoy full tax exemption on leave encashment at retirement.<\/li>\n\n\n\n<li>Private employees can claim an exemption up to \u20b925 lakhs.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Leave_Encashment_Calculation_in_India\"><\/span>Leave Encashment Calculation in India<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Calculating leave encashment can seem tricky, but it\u2019s straightforward once you understand the formula.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Leave_Encashment_Formula\"><\/span>Leave Encashment Formula<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>The basic formula for leave encashment calculation is:<\/p>\n\n\n\n<p><strong>[(Average Basic Salary + Average Dearness Allowance) \/ 30] \u00d7 Number of Earned Leaves<\/strong><\/p>\n\n\n\n<p>Here\u2019s a breakdown:<\/p>\n\n\n\n<ul>\n<li><strong>Average Basic Salary<\/strong>: The average basic pay received on a monthly basis.<\/li>\n\n\n\n<li><strong>Average Dearness Allowance (DA)<\/strong>: The average monthly dearness allowance.<\/li>\n\n\n\n<li><strong>Number of Earned Leaves<\/strong>: The total accumulated earned leave balance eligible for encashment.<\/li>\n<\/ul>\n\n\n\n<p>This calculation provides the amount payable to employees for unused leaves.<\/p>\n\n\n\n<p>Now, if you are wondering how to calculate leave encashment \u2013 just follow this example.&nbsp;<\/p>\n\n\n\n<p><strong>Example<\/strong><\/p>\n\n\n\n<p>Neha has been working at ABC Ltd. for 15 years and is entitled to 30 days of annual leave. Her monthly salary, including Dearness Allowance, is \u20b960,000. Neha used 150 days of leave during her career and accumulated the remaining leaves.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Calculation_of_Leave_Encashment\"><\/span>Calculation of Leave Encashment:<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul>\n<li><strong>Total leave entitlement over 15 years<\/strong>: 15 years \u00d7 30 days\/year = 450 days<\/li>\n\n\n\n<li><strong>Accumulated Leaves (Earned Leaves)<\/strong>: 450 days \u2212 150 days = 300 days<\/li>\n\n\n\n<li><strong>Per Day Salary<\/strong>: \u20b960,000 \/ 30 = \u20b92,000<\/li>\n\n\n\n<li><strong>Leave Encashment Amount<\/strong>: \u20b92,000 \u00d7 300 = \u20b96,00,000<\/li>\n<\/ul>\n\n\n\n<p>In this case, Neha\u2019s leave encashment of \u20b96,00,000 exceeds \u20b93,00,000, so only \u20b93,00,000 will be exempt from tax. The remaining \u20b93,00,000 will be taxable.<\/p>\n\n\n\n<p><strong>For tax exemption under Section 10(10AA), the least of the following will apply:<\/strong><\/p>\n\n\n\n<ol>\n<li>Actual leave encashment received: \u20b96,00,000<\/li>\n\n\n\n<li>Average salary for the last 10 months: \u20b960,000 \u00d7 10 = \u20b96,00,000<\/li>\n\n\n\n<li>Leave entitlement limit (30 days per year \u00d7 15 years): \u20b99,00,000<\/li>\n\n\n\n<li>Maximum exemption allowed: \u20b925,00,000<\/li>\n<\/ol>\n\n\n\n<p><strong>Exempt amount<\/strong>: Lower of all values = \u20b96,00,000<\/p>\n\n\n\n<p>Thus, <strong>taxable leave encashment<\/strong> = \u20b96,00,000 \u2212 \u20b96,00,000 = \u20b90 (no tax payable on this amount).<\/p>\n\n\n\n<p>In this case, Neha&#8217;s entire leave encashment of \u20b96,00,000 is exempt from tax.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Leave_Encashment_on_Basic_or_Gross\"><\/span>Leave Encashment on Basic or Gross<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul>\n<li><strong>Basic Salary<\/strong>: Most private companies calculate leave encashment only on the basic pay and dearness allowance, excluding allowances like HRA, bonuses, or incentives.<\/li>\n\n\n\n<li><strong>Gross Salary<\/strong>: In rare cases, leave encashment includes gross salary, but this is subject to the company\u2019s policy.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Leave_Encashment_Formula_in_Excel\"><\/span>Leave Encashment Formula in Excel<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>To calculate in Excel, you can use this formula:<\/p>\n\n\n\n<p>= (Basic_Salary + DA) * Unused_Leave * (1\/30)<\/p>\n\n\n\n<p>Simply input your salary and leave details into the respective cells, and the formula will provide the encashment amount.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Leave_Encashment_Calculation_Formula_for_Private_Company\"><\/span>Leave Encashment Calculation Formula for Private Company<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>For private companies, leave encashment is calculated as per their internal policies, typically based on basic salary and a prescribed formula. For tax exemption purposes, refer to Section 10(10AA) of the Income Tax Act.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Latest_Supreme_Court_Judgement_on_Leave_Encashment\"><\/span>Latest Supreme Court Judgement on Leave Encashment<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>In a recent judgment, the Supreme Court reaffirmed that leave encashment is a part of an employee\u2019s salary. The Court emphasized that once leave encashment is earned, it becomes the employee\u2019s property. Any attempt to deny leave encashment without legal backing violates constitutional rights.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Leave_Encashment_Application\"><\/span>Leave Encashment Application<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>A leave encashment application is a formal request made by employees to receive payment for accumulated leaves, either during employment or upon retirement.&nbsp;<\/p>\n\n\n\n<p>To apply for leave encashment:<\/p>\n\n\n\n<ol>\n<li><strong>Get the leave encashment form<\/strong> from HR.<\/li>\n\n\n\n<li><strong>Fill out the form<\/strong> with details like leave balance and salary.<\/li>\n\n\n\n<li><strong>Attach documents<\/strong> such as leave balance statement or LTC proof.<\/li>\n\n\n\n<li><strong>Submit the form<\/strong> to HR for processing.<\/li>\n\n\n\n<li><strong>Wait for approval<\/strong> and payment to be credited.<\/li>\n<\/ol>\n\n\n\n<p>Make sure to follow the guidelines for leave encashment on LTC if applicable.<\/p>\n\n\n\n<pre class=\"wp-block-verse\"><strong>Also Read - <a href=\"https:\/\/www.hirist.tech\/blog\/leave-application-for-festival-in-office-with-format-samples-2024\/\" target=\"_blank\" rel=\"noreferrer noopener\">Leave Application for Festival in Office with Format &amp; Samples (2025)<\/a><\/strong><\/pre>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Process_of_Leave_Encashment\"><\/span>Process of Leave Encashment<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Leave encashment lets employees convert unused paid leave into cash. While the process can vary by company, here\u2019s a simple breakdown.<\/p>\n\n\n\n<ol>\n<li><strong>Accumulation of leaves<\/strong>: Employees accumulate unused leave days, which are eligible for encashment.<\/li>\n\n\n\n<li><strong>Request submission<\/strong>: The employee submits a request, either through a form or writing to HR.<\/li>\n\n\n\n<li><strong>Calculation and approval<\/strong>: HR calculates the encashment amount, usually by multiplying the daily salary (basic pay + dearness allowance) with the number of days. Approval may be needed from the manager or HR.<\/li>\n\n\n\n<li><strong>Payment<\/strong>: Once approved, the encashed amount is paid, either in the final salary or separately. Taxes are deducted if applicable.<\/li>\n<\/ol>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Accenture_Leave_Encashment\"><\/span>Accenture Leave Encashment<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Leave encashment in <a href=\"https:\/\/www.hirist.tech\/accenture-careers.html\" target=\"_blank\" rel=\"noreferrer noopener\">Accenture<\/a> is calculated using this formula:<\/p>\n\n\n\n<p><strong>(Fixed Salary \/ 2350) * Number of paid leave hours (up to 270)<\/strong><\/p>\n\n\n\n<p>For example, if your CTC is \u20b98 LPA, with \u20b96 Lakh as fixed salary and \u20b92 Lakh as variable:<\/p>\n\n\n\n<ol>\n<li>Variable portion: \u20b92,00,000<\/li>\n\n\n\n<li>Applying the formula: (6,00,000 \/ 2350) * 100 = \u20b925,532.<\/li>\n<\/ol>\n\n\n\n<p>This is the leave encashment amount for 100 hours of paid leave.&nbsp;&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"TCS_Earned_Leave_Encashment\"><\/span>TCS Earned Leave Encashment<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>At <a href=\"https:\/\/www.hirist.tech\/tcs-careers.html\" target=\"_blank\" rel=\"noreferrer noopener\">Tata Consultancy Services (TCS)<\/a>, employees up to the C3B grade can encash earned leaves. Employees receive 16 earned leaves annually &#8211; which accumulate up to 48 days. To calculate the encashment, multiply the basic salary by 22, then by the number of earned leaves.<\/p>\n\n\n\n<p>To apply for earned leave encashment in TCS, employees must submit a written request to HR or complete a form. After the C3B grade, unused leaves expire at the end of the financial year.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Wrapping_Up\"><\/span>Wrapping Up<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>And that&#8217;s all you need to know about leave encashment in India. Whether you&#8217;re a government or private-sector employee, understanding the tax exemptions, limits, and calculation formulas can help you maximize your benefits.&nbsp;<\/p>\n\n\n\n<p>For IT professionals looking for new job opportunities, <a href=\"https:\/\/www.hirist.tech\/?ref=blog\" target=\"_blank\" rel=\"noreferrer noopener\">Hirist<\/a> is a top online job portal that connects you with the best tech jobs in India. Visit Hirist to find your next career move!<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"FAQs\"><\/span>FAQs<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Is_there_a_Leave_Encashment_Act_1948\"><\/span>Is there a Leave Encashment Act 1948?&nbsp;<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>There is no specific &#8220;Leave Encashment Act 1948.&#8221; Leave encashment is governed by various employment rules and tax provisions.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_are_the_leave_encashment_rules_for_central_government_employees\"><\/span>What are the leave encashment rules for central government employees?&nbsp;<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Central government employees get leave encashment upon retirement or resignation based on their basic salary and accumulated earned leaves.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_are_10_days_leave_encashment_rules\"><\/span>What are 10 days leave encashment rules?&nbsp;<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Employees can encash up to 10 days of earned leave, depending on their organization&#8217;s policies.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Is_leave_encashment_calculation_26_days_or_30_days\"><\/span>Is leave encashment calculation 26 days or 30 days?&nbsp;<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Leave encashment is typically calculated on a 30-day basis, not 26 days unless specified differently by the employer&#8217;s policy.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_are_the_DOPT_orders_on_leave_encashment_on_LTC\"><\/span>What are the DOPT orders on leave encashment on LTC?&nbsp;<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>The Department of Personnel and Training (<a href=\"https:\/\/dopt.gov.in\/\" target=\"_blank\" rel=\"noreferrer noopener nofollow\">DOPT<\/a>) issues orders regarding leave encashment on Leave Travel Concession (LTC). According to these orders, employees can encash earned leaves when they are unable to avail LTC, provided the guidelines are followed.<\/p>\n\n\n\n<pre class=\"wp-block-verse\"><strong>Also Read - <a href=\"https:\/\/www.hirist.tech\/blog\/lta-leave-travel-allowance-in-salary-calculation-exemption-more-2024\/\" target=\"_blank\" rel=\"noreferrer noopener\">LTA (Leave Travel Allowance) in Salary \u2013 Calculation, Exemption &amp; More (2025)<\/a><\/strong><\/pre>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"How_to_submit_an_application_for_LTC_leave_encashment\"><\/span>How to submit an application for LTC leave encashment?<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>To apply for LTC leave encashment, employees must submit a formal request along with the required documentation to HR or the relevant department.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Is_leave_encashment_taxable_on_resignation\"><\/span>Is leave encashment taxable on resignation?&nbsp;<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Yes, leave encashment is taxable on resignation, based on your income tax slab, with exemptions for government employees.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_surrender_leave_encashment\"><\/span>What is surrender leave encashment?<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Surrender leave encashment refers to the process of voluntarily giving up earned leave for monetary compensation.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_the_difference_between_gratuity_and_leave_encashment\"><\/span>What is the difference between gratuity and leave encashment?<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Gratuity is a lump sum payment given to an employee upon retirement, resignation, or death after a minimum of five years of service. Leave encashment, on the other hand, is the monetary compensation for unused earned leaves.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_the_leave_encashment_exemption_section\"><\/span>What is the leave encashment exemption section?&nbsp;<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Leave encashment exemption is covered under Section 10(10AA) of the Income Tax Act.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Did you know that the money you receive for unused leave could be partially tax-free?&nbsp;Leave&hellip;<\/p>\n","protected":false},"author":1,"featured_media":4253,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[17],"tags":[59],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v22.5 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Leave Encashment: Rules, Tax Exemptions, &amp; Calculation | Hirist<\/title>\n<meta name=\"description\" content=\"Learn about leave encashment rules, limit, benefits, tax exemptions, and how to calculate it under section 10 10aa of income tax act.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.hirist.tech\/blog\/leave-encashment-rules-tax-exemptions-limit-calculation-formula-more\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Leave Encashment: Rules, Tax Exemptions, &amp; 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