Leave Encashment Tax Calculator
Calculate Tax on Leave Encashment & LTA (FY 2026-27)
| Component | Amount |
|---|---|
| Leave Encashment Received | |
| Leave Encashment Exemption (u/s 10(10AA)) | |
| Taxable Leave Encashment | |
| LTA Received | |
| LTA Exemption (u/s 10(5)) | |
| Taxable LTA | |
| Total Taxable Amount |
💰 Leave Encashment Tax Calculator India (FY 2026-27)
Use this Leave Encashment Tax Calculator to calculate tax on leave encashment at retirement, during service, or on death. Also calculates LTA (Leave Travel Allowance) exemption under Section 10(5) and Section 10(10AA) for FY 2026-27 (AY 2027-28).
💡 Leave Encashment Exemption Rules (FY 2026-27)
At Retirement (Section 10(10AA))
Exemption is LEAST of:
- ₹25,00,000 (maximum limit)
- Actual leave encashment received
- Cash equivalent of unavailed leave (max 30 days per year of service)
- Average salary of last 10 months × unavailed leave days / 30
Government Employees: Entire leave encashment is fully exempt (no limit)
Non-Government Employees: Subject to ₹25 lakh limit
During Service
Fully Taxable - No exemption available
On Death
Fully Exempt for legal heirs - No tax applicable
✈️ LTA (Leave Travel Allowance) Exemption
Conditions for LTA Exemption:
- Valid for 2 journeys in a block of 4 years
- Current block: 2022-2025, Next block: 2026-2029
- Only for travel within India
- Only for employee + family (spouse + 2 children)
- Exemption = Actual travel expense or LTA received (whichever is lower)
Not Allowed:
- ❌ Foreign travel expenses
- ❌ Hotel/food/sightseeing expenses
- ❌ Personal vehicle fuel costs
- ❌ More than 2 children (eldest 2 only)
📊 Leave Encashment Calculation Example
Example 1: Private Employee Retirement
- Service: 30 years
- Average Salary (last 10 months): ₹80,000
- Unavailed Leave: 200 days
- Leave Encashment: ₹5,33,333
Exemption (Least of):
- ₹25,00,000 (maximum limit)
- ₹5,33,333 (actual received)
- 30 days × 30 years = 900 days (max allowed = 900 days)
- ₹80,000 × 200 / 30 = ₹5,33,333
Exemption: ₹5,33,333 (fully exempt)
Taxable: ₹0
Example 2: Private Employee - High Amount
- Service: 35 years
- Average Salary: ₹2,00,000
- Leave Encashment: ₹40,00,000
Exemption: ₹25,00,000 (maximum limit)
Taxable: ₹15,00,000 (added to salary income)
📅 LTA Block Years
| Block Period | Years |
|---|---|
| Block 1 | 2018-2021 |
| Block 2 | 2022-2025 |
| Block 3 (Current) | 2026-2029 |
Note: You can claim LTA for 2 journeys in the 2026-2029 block.
🎯 How to Claim LTA Exemption
- Submit travel tickets/boarding passes to employer
- Declaration form for family members
- Keep all original tickets and receipts
- Claim only actual travel fare (not food/hotel)
- Shortest route fare applies (air/rail/bus)
- Can carry forward 1 unused journey to next block
❓ FAQ - Leave Encashment Tax
1. Is leave encashment taxable in India?
Leave encashment during service is fully taxable. At retirement, it's exempt up to ₹25 lakh for non-government employees (fully exempt for government employees). On death, it's fully exempt.
2. What is the maximum exemption for leave encashment?
For non-government/private employees, the maximum exemption is ₹25,00,000 at the time of retirement. For government employees, entire leave encashment is exempt without any limit.
3. Is leave encashment taxable during service?
Yes, leave encashment received during employment (before retirement) is fully taxable as salary income. No exemption is available under Section 10(10AA).
4. How is LTA exemption calculated?
LTA exemption is the lower of: (a) Actual LTA received, or (b) Actual travel expenses incurred for employee and family. Only 2 journeys allowed per 4-year block.
5. Can I claim LTA for foreign travel?
No, LTA exemption is available only for travel within India. Foreign travel expenses are fully taxable. Also, hotel, food, and sightseeing expenses are not covered.
6. What is included in average salary for leave encashment?
Average salary includes basic salary + dearness allowance (forming part of retirement benefits). It's the average of last 10 months immediately preceding retirement.
7. How many days leave can be encashed at retirement?
Maximum 30 days per year of service can be considered for exemption calculation. For example, 30 years service = 900 days maximum for exemption calculation.
8. Is TDS deducted on leave encashment?
Yes, employer deducts TDS on taxable portion of leave encashment. Exempted amount is not subject to TDS. TDS is part of salary TDS.
9. What happens to leave encashment received on death?
Leave encashment received by legal heirs on death of employee is fully exempt from income tax under Section 10(10AA). No limit applies.
10. Can unused LTA be carried forward?
Yes, one unused LTA journey from the current block can be carried forward to the next block. So you could potentially claim 3 LTAs in the next block (2 of that block + 1 carried forward).
📋 Documents Required for LTA Claim
- ✅ Travel tickets (Air/Rail/Bus)
- ✅ Boarding passes
- ✅ Invoice/receipt from travel agency
- ✅ Declaration of family members
- ✅ Proof of travel dates
- ✅ Leave application and sanction
👉 This calculator provides estimation based on Income Tax Act provisions for FY 2026-27. For complex cases or verification, consult a qualified CA.