How to use the Leave Encashment Calculator?

In order to use the Leave Encashment Calculator you have to follow the below-mentioned steps:

• Enter the Basic (Salary + Dearness Allowance) of the person for whom you want to calculate the leave encashment.
• Enter the number of earned leaves.
• Finally, you will get the leave encashment which they have to receive from their organization.

What is Leave Encashment?

Leave encashment refers to the amount of money received by the employers from the employees for their unutilized leaves.

This blog answers everything about leave salary encashment, when leaves can be encashed and whether the leave salary encashment is taxable or not.

To simplify, encashment means these leaves can be encashed while you leave the organization, or retire from the organization. Generally, this is a part of the Full and Final settlement (FnF) the company performs upon their termination or resignation.

Types of Leaves

It is important to know about the types of leaves and which types of leaves can be encashed and which can’t be encashed. Some of the leaves are:

• Casual Leave: These kinds of leaves are most commonly used by the employees. The duration of these leaves provided to the employees varies from organization to organization but there is a minimum of 7 to 10 days. If this kind of leave is accepted for encashment your leave will be eligible for leave encashment.
• Privilege Leave: A privilege leave is a kind of leave which can be availed prior to the information provided by the employee and they are eligible for leave encashment after a certain period of time. Encashment of this kind of leaves varies from organization to organization.
• Medical Leave: Employees can avail of these kinds of leaves when they are incompetent at work due to their bad health conditions. Once sanctioned by the employer it can be possible to encash these kinds of leaves. Long-term medical leaves are not eligible for encashment and the number of these kinds of leaves provided varies from company to company.
• Sabbatical Leave: These kinds of leaves are provided to the employees to expand their knowledge. These can be done through several courses and certifications. These kinds of leaves are paid and the organization reimburses them, and are considered for leave encashment.
• Holiday Leaves: These kinds of leaves are also paid leaves and no amount is deducted from the employee’s salary. They are also eligible for leave encashment.
• Maternity Leaves: Maternity leave is available to all pregnant female employees during their term of employment. The span of maternity leave varies from 12 weeks to 26 weeks. This kind of leave can be extended but these extended leaves are not eligible for payment. The leave period varies from organization to organization.

Leave Encashment Exemption

When any kind of leave is encashed by the employee one can avail certain partial and full exemptions. The conditions of exemptions are:

For the government employees, the leave encashment is fully exempted from tax.

Leaves are encashed if the leave encashment is provided to the legal heirs of the employees.

In case of the government employees, leave encashment is exempt based on the provided computation

Leave Encashment Calculation

To understand leave encashment calculation let’s take an example.

Suppose Mr. X is retiring after 15 years of their service. He was entitled to 20 days of paid leave per annum from his organization, meaning he had 300 days of leave during her entire service to the company.

Out of this Mr. X has already utilized 125 days of paid leave. He is left with 175 days of unutilized paid leave.

Now as for his salary, he is drawing a basic salary plus a dearness allowance of 30,000 per month at the time of retirement.

Leave encashment is calculated based on the number of unutilized leaves multiplied by salary per day.

Salary per day= 30,000/30= ₹ 1,000

Leave Encashment Received= 175*1,000= ₹ 1,75,000

Thus Mr. X will receive an encashment of ₹ 1,75,000 as leave encashment.

How Leave Encashment Calculator works?

Earlier, people used to calculate leave encashment manually. However, now they can calculate it in just a few seconds by simply entering a few details.

Moreover, the Leave Encashment Calculator is an online tool that simplifies the process. It helps calculate the leave encashment an employee is entitled to receive from their employer or organization at the end of their service, whether through termination or resignation.

FAQs (Frequently Asked Questions)

How can I calculate my leave encashment?

In order to calculate the leave encashment you can use the formula

(Basic Salary+ Dearness Allowance)/30* Number of Earned Leaves

How is 300 leaves encashed calculated?

First, add the Basic salary and Dearness Allowance, then divide the sum by 30. Next, multiply the quotient by the number of days of Earned Leave, which should not exceed 300 days.

Can I encash my leave?

You can either encash or clear your annual leave if your employment was terminated. If the unused leave is encashed, it should be calculated at the gross rate of pay based on your last drawn salary.