Leave Encashment Calculator

Estimating your taxes before you file your tax return is an essential part of tax planning. However, income tax computation requires good knowledge of taxation laws.

Leave Encashment & Taxable Leave Salary Calculator

Leave encashment is a component of salary that is received on conversion of unavailed leaves into cash. Learn how to calculate leave enchashment using the Taxable Leave Salary calculator

What is leave encashment?

Leave encashment is the amount of money an employee gets from his employer for the untaken leaves. As per the policy, an employer must clear all employee dues with cash or adjust the leave quota amount for the upcoming calendar year. The encasement leave amount can be availed by the employees of an organization when they leave the job, retire or continue their service.

What is the Leave encashment calculator?

Leave encashment calculator is an online utility tool that helps you to calculate the amount of untaken leave. This calculator can be accessed from anywhere and anytime. The labour laws have mandated that certain corporations and companies provide minimum paid leaves to their employees in a year.

How to use myitronline leave encashment calculator?

To calculate the amount of unused leave you can take our calculator in use. It is so spartan and easy to use. One must need certain details to get the output which is given in the following.

  • First of all, You need to select the assessment year (A.Y.) for which you want your tax to be calculated.
  • Then you have to select the employee type based on the organization you are working for.
  • Next, you need to put the entire amount of your leave salary that is credited to your account by the organizations. In case you got the leave salary during the retirement period, it must be entered in the last column.
  • After that enter the time of your employment in years.
  • Next, you also have to fill out the info on the joining date and the termination of service.
  • After filling out this information, you are required to fill out the information for the last 10 months' salary.
  • Input the number of days of leaves you were provided during your complete service period.
  • Input the number of days of leaves availed/encashed during your absolute employment period.

Now, fill out the leave salary only if it was exempted through any earlier years. And, the leave encashment calculator will show you the exempted and taxable leave salary.

Leave encashment calculation

We have given an example below so that you can understand the calculation of leave encashment.

For example- Let's suppose, Mr. Sharma is getting retired after 20 years of service from an organization. He was provided 25 days of paid leave per annum by the organization. We know there he had 500 leaves during all 20 years.
However, Mr. Sharma had already taken 150 paid leaves per annum from his company, and he had left only 350 untaken leaves.
Now, as for his salary, he is pulling a basic salary with a dearness allowance (DA) of Rs 35,000 per month at the time of retirement. Now, leave encashment is calculated based on the number of unused leaves procreated by salary per day, which would be computed as

Salary of one day = 35,000/30 = Rs. 1167

Leave encashment received = 350*1167 = 4,08,450

Thus, Mr. Sharma obtained an amount of Rs 4,08,450 as leave encashment.

Particulars Amount in Rs
Leave encashment received 4,08,450
Tax exemption: least of the following
Amount notified by the government 3,00,000
Actual leave encashment 4,08,450
The average salary for 10 months (35000*10) 3,50,000
One day salary multiplied by (30* completed years of service minus unutilized days of leave i.e.,= 1167* (30*20 – 150) 5,25,150
Exemption on leave encashment obtained minus 3,00,000 (since it’s the shortest of the above i.e., Rs. 4,08,450 – Rs. 3,00,000) 1,08,450
Leave encashment taxable as ‘income from salary’ 1,08,450

Types of leaves

Different types of leaves can be encashed easily but before that one must need to be aware of these types of leaves. Major of the leaves are mentioned below-
Casual leave
Casual leave is the most common type of leave that is used by most employees. The duration of casual leave may be different from company to company. But usually, a minimum of 7 to 8 casual leaves are allowed. Before availing of casual leaves, it is a must for employees to inform the employer about the number of casual leaves and the date of joining back to the organization.
Medical leave
Medical leaves can be availed by the employee in case of a medical emergency or health conditions. Before availing of the medical leaves, one has to inform the employer about it, and the pending leaves. These leaves might be disparate from one organization to another.
Privilege Leave
A privilege leave is a type of leave that an employee can use when prior information is provided to the employee, and the leave is approved. It becomes qualified for encashment after an exact period, though the policy for privilege leave encashment differs from organization to organization.
Holiday Leave
Holiday leaves can also be availed by the employee These are paid holidays and no amount from your salary is deducted. But these holiday leaves depend on the policy of an organization and are eligible for leave encasement.

Frequently asked questions

Leave encashment is a process in which the employees are issued an amount of money for the unused leaves. There are different types of leaves such as medical leave, casual leave, privilege leave, etc.

No. It's not essential for the employers to provide leave encashment to the employees. This is a way to motivate the employees and strengthen the bond between employee and employer.

Yes. Leave encashment is taxable.

The formula to calculate leave encashment is following- {Basic Salary + Dearness Allowance} divided by 30. The final amount is multiplied by the number of leave encashment leave days.

No. If the encashment is received by the nominee or legal heir then it will not be taxable.

The encashment amount is calculated on the basis of the company's rules and policies. The basic salary and dearness allowance is taken under consideration to calculate the leave encashment.

It depends on the plan obtained by you. The minimum amount of contribution towards leave encashment plans which starts from Rs.5,000 per year and there is no limit on maximum to make.

Yes. It is allowed to invest in multiple leave encashment schemes.

There are more than three types of leaves available for employees. Major of them are following-
1. Maternity Leave
2. Sick Leave
3. Holiday Leave
4. Casual Leave
5. Marriage Leave
6. Privilege Leave
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