₹25 lakh cap (raised May 2023)
Leave Encashment Tax Calculator
Section 10(10AA) exemption (now Section 24 of IT Act 2025). ₹25 lakh cap for non-government employees, full exemption for government employees.
Tax-exempt portion
₹10,00,000
Lowest of the four formulas
- Taxable portion₹0
- Formula 1: Actual received₹10,00,000
- Formula 2: ₹25 lakh cap₹25,00,000
- Formula 3: 10 × avg salary₹10,00,000
- Formula 4: 30 days × years × avg₹10,00,000
The ₹25 lakh cap was raised from ₹3 lakh by CBDT notification in May 2023. The cap applies cumulatively across all employers.
How the four-formula lowest-of works
Leave encashment on retirement is partially exempt. The exempt portion is the lowest of these four amounts:
- Actual leave encashment received.
- ₹25,00,000 - the absolute cap (raised by CBDT from ₹3 lakh in May 2023).
- 10 months × average salary of last 10 months.
- 30 days × completed years of service × average salary of last 10 months.
Government employees receive the full leave encashment tax-free. The cap applies only to non-government employees.
Statutory authority
Related calculators
FAQs
What is the leave encashment exemption limit?▾
For government employees: fully exempt. For non-government employees: lowest of (a) actual leave encashment, (b) ₹25,00,000 (raised from ₹3 lakh in May 2023), (c) 10 × average salary of last 10 months, (d) cash equivalent of unutilised leave at 30 days × completed years × average salary.
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