Payroll & attendance (India)
Leave encashment calculator
The standard Indian formula: per-day wage from basic plus DA over 30, times the earned-leave days being encashed.
- Per-day wage
- ₹1,333
- Encashment value
- ₹16,000
Runs entirely in your browser — nothing you type is sent or stored. Indicative arithmetic, not legal, payroll or tax advice.
The formula
- Per-day wage = monthly (basic + DA) ÷ 30
- Encashment = per-day wage × earned leave days
When encashment happens
Encashment arises in two situations: annually, when leave above the carry-forward cap would lapse and policy allows converting it to pay; and at exit, when the accumulated earned-leave balance is settled in the full and final. State Shops and Establishments Acts and the Factories Act govern how much earned leave accrues and carries forward; encashment terms beyond that are largely policy.
The base is almost always basic plus dearness allowance, not gross — encashment on gross roughly doubles the cost and is rare. The divisor convention (30 versus 26) should be stated in the leave policy and used consistently for both encashment and LOP.
Tax treatment, briefly
For private-sector employees, leave encashment received at retirement or resignation is exempt from income tax up to a lifetime limit of ₹25 lakh (raised from ₹3 lakh in 2023) subject to the computation rules in section 10(10AA) of the Income-tax Act. Encashment while still in service is fully taxable as salary. Confirm the current limits and your specific case with a tax advisor — this page is arithmetic, not tax advice.
Stop calculating this by hand
Workclave keeps earned-leave accrual, usage and balances tied to the same approved attendance record payroll uses — so the balance being encashed is never in dispute.
Leave encashment calculator — common questions
Which leave types can be encashed?
Typically only earned/privilege leave. Casual and sick leave normally lapse and are not encashable. Your policy defines the annual cap on encashable days and whether in-service encashment is offered at all.
Is the leave balance itself governed by law?
Accrual and carry-forward minimums come from the applicable state Shops and Establishments Act or the Factories Act (commonly one day of earned leave per 20 worked). Balances at exit must be settled in the full and final — an accurate day-level attendance and leave record is what makes that number undisputed.
30 or 26 as the divisor?
30 is the dominant convention for encashment. Whichever you choose, use it consistently and state it in the policy — mixing divisors between encashment and deductions is a classic audit finding.
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