30 days, then encash
The most leave anyone can carry into the next year. Anything above thirty days has to be paid out, not banked.
Source: OSH Code 2020, s.32(1)(vii)(a) and (ix)
Free Excel calculator
Leave Encashment Calculator in Excel for Indian Employers
Most calculators do one sum: days times basic divided by thirty. That answer is wrong for anyone whose basic is less than half their pay, and it tells you nothing about how much of it is taxable. This one does both, on the two different definitions of pay the law actually uses.
- Payout and tax worked out separately
- Exit and year-end both covered
- Built on the labour codes, not the repealed Acts
Instant download. No card needed.
Attendo presents
Leave Encashment Calculator
For Indian employers
6
connected sheets
ATTENDO PRESENTS
What's inside
Everything the calculation actually needs
Six sheets. You fill in one of them and read the rest.
Sheet 1
Rules and rates
Every figure the file uses, on one editable sheet, each with the section it comes from. Change one here and the whole workbook follows.
Sheet 2
Employee master
One row per person. Dates, pay, leave balance, and a flag for whether they count as a worker under the Code. The only sheet you type into.
Sheet 3
Encashment on exit
The payout, then the tax split laid out limb by limb so you can see which of the four capped the exemption and why.
Sheet 4
Year-end encashment
For people still employed on 31 December. Separates what must be encashed from what may be encashed if they ask.
Sheet 5
Summary
Totals for the month, plus a short list of the things the file cannot decide for you and a human has to check.
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Balances that stay right
Attendo (formerly Petpooja Payroll) tracks leave as it is taken, so the balance on exit day is already correct.
Why this matters
Why the usual formula gives the wrong number
Days times basic divided by thirty is the formula every free calculator uses, and for a lot of employees it is simply too low.
The labour codes define wages as basic pay plus dearness allowance plus retaining allowance. Then comes the part that catches people out: if everything excluded from that definition, the HRA and conveyance and the rest, adds up to more than half of total pay, the excess counts as wages anyway. So the base cannot fall below half of what you actually pay someone. An employee on a fourteen thousand basic inside a forty six thousand salary is encashed on twenty three thousand, not fourteen.
The tax side uses a different definition again. Section 19 of the Income-tax Act 2025, which replaced the 1961 Act on 1 April 2026, works on basic plus dearness allowance plus commission on turnover, with no floor at all. Which means the figure you pay on and the figure the exemption is calculated on are genuinely different numbers for the same person in the same month. The employee above is paid on twenty three thousand and taxed against fifteen thousand, and part of a small payout ends up taxable.
Then there is timing. Encashment on retirement or resignation can be exempt. Encashment taken while still employed is fully taxable, every rupee. Same money, same employee, completely different outcome depending on the date.
One limit to check before you rely on any of this: the Code applies to establishments with ten or more workers. Below that it does not apply at all and your state Shops and Establishments Act governs leave instead. This file was built on the four labour codes that came into force on 21 November 2025, which repealed 29 earlier Acts including the Factories Act 1948. If a calculator still cites section 79 of that Act for leave, it has not been updated since. It sits alongside our overtime calculation template, which works overtime out on the same definition of wages, and the gratuity calculator for the other big exit payment.
Preview
Four triggers, four different answers
Every situation the law treats differently, and which sheet handles it. The tax column is the one that surprises people.
- Each row shows what triggers the payment, whether it happens automatically or only if the employee asks, and how it is taxed.
- The sample file has seven employees, each one chosen to make a different rule visible on screen rather than to look tidy.
- Every figure in it was checked by recalculating the workbook and comparing it against the arithmetic worked out by hand.
| What happens | When | Automatic? | Tax | Section | Sheet |
|---|---|---|---|---|---|
| Employee resigns or retires | On exit | Yes | Can be exempt | 32(1)(vi) | 03 |
| Employee dies in service | On death | Yes, to the nominee | Can be exempt | 32(1)(vi) | 03 |
| Balance passes 30 days | 31 December | Yes | Fully taxable | 32(1)(ix) | 04 |
| Employee asks to encash | 31 December | No, on demand | Fully taxable | 32(1)(viii) | 04 |
| All four | Covered | 03/04 |
Key stats
Three numbers that decide the answer
₹25 lakh once, ever
The tax exemption ceiling, and it is a lifetime figure across every employer, not one per job.
Source: Income-tax Act 2025, s.19(1), Table Sl. No. 142 working days
How long you have to pay it after someone leaves. Encashment is wages, so the same deadline applies.
Source: Code on Wages 2019, s.17(2)
Common mistakes
6 Leave Encashment Mistakes Indian Employers Make
Paying on basic alone
If basic and dearness allowance come to less than half of total pay, the base lifts to half. Paying on the basic underpays the employee, and the shortfall is recoverable for years afterwards.
Using one figure for both calculations
The payout base and the tax base are defined differently and are often different amounts. Using the payout figure for the exemption overstates it, and the difference shows up as a TDS shortfall.
Treating ₹25 lakh as a fresh allowance
It is a lifetime ceiling across every employer. Someone who claimed twenty three lakh at a previous job has two lakh left, not twenty five, and you are the one who has to ask.
Assuming any encashment is tax free
The exemption applies on retirement or resignation. Encashment paid to someone still employed is fully taxable, so year-end payouts have to go through payroll as salary.
Withholding leave from a short year
Someone who worked under 180 days cannot take leave that year, but on the way out they are still owed pay for what accrued. The Code says so in as many words. Someone who joined mid-year qualifies on a quarter of the days left, not on 180.
Applying the Code to everyone
Managers and higher-paid supervisors are outside the statutory definition of a worker. They are still owed what their contract says, but quoting the Code at them, or refusing them on the strength of it, is wrong either way.
Comparison
What most calculators leave out
A calculator you find online
One box, one answer
- Days times basic, divided by thirty
- No wages floor, so a low basic pays out low
- One employee at a time
- Nothing about tax, or a flat 'it is exempt'
- Usually still quoting the Factories Act
Free either way
This calculator
Six sheets, whole team
- Wages under the Code, floor applied where it bites
- Shows you when the floor lifted the base, and to what
- Forty employees, exit and year-end on separate sheets
- All four exemption limbs, so you see which one capped it
- Built on the codes in force since November 2025
Get the free calculator
Six sheets, forty employees, exit and year-end. Short form, instant download.
FAQ
Common questions
Is this leave encashment calculator really free? +
Yes, completely. No card and no trial. The form asks for your name, work email, phone and city, then the file downloads straight away. The Attendo team may follow up about payroll software, and you are free to say no thanks.
How is leave encashment calculated? +
Take the employee's daily wage and multiply it by the number of unused leave days. The daily wage is monthly wages divided by 30, which is the usual convention rather than a figure the Code sets. The part almost everyone gets wrong is what counts as wages: under the labour codes it is basic pay plus dearness allowance, but if that comes to less than half of total pay, it is lifted to half. So an employee on a small basic and large allowances is owed more than the basic alone suggests.
Is leave encashment taxable? +
It depends entirely on when it is paid. Encashment on retirement or resignation can be exempt, up to the least of four amounts, with a lifetime ceiling of twenty five lakh rupees across every employer you ever work for. Encashment taken while still employed is fully taxable, with no exemption at all. The calculator splits the two.
Can an employee carry forward unlimited leave? +
No. Thirty days is the maximum that carries into the next calendar year, and any balance above that has to be encashed. There is one exception that is easy to miss: if the employee applied for leave and the employer refused it, that refused leave carries forward with no limit at all.
Does this apply to managers? +
Not the statutory part. The right to encashment under the labour codes belongs to a 'worker', which excludes anyone employed mainly in a managerial or administrative role, and supervisors earning more than eighteen thousand rupees a month. Managers are still owed whatever their contract or your leave policy promises, and the calculator still works that out. It just tells you which of the two you are relying on.
A
About Attendo
Attendo, formerly Petpooja Payroll, is payroll and attendance software used by more than 40,000 businesses in India. It tracks leave as it is taken, so a balance is never reconstructed from memory on someone's last day. See what it does, or browse all the free HR templates.
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Stop rebuilding balances
Leave tracked as it is taken. The number on exit day is already right.
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