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CBDT Notification May 2023 · Section 10(10AA)

Leave Encashment Exemption Calculator

Accurately calculate your tax-free leave encashment at retirement or resignation under Section 10(10AA). Applies the updated ₹25 Lakh statutory exemption limit for non-government employees with full 4-test formula breakdown.

Central & State Govt 100% Tax-Free
Private Sector ₹25 Lakh Enhanced Cap
Least of 4 Statutory Limits
Quick Profiles:

Employee & Encashment Details

Full years only
Max 30 days statutory
Total taken/encashed

The ₹25,00,000 statutory limit is a cumulative lifetime ceiling across all employers.

Section 10(10AA)(ii) — Non-Government / Private / PSU Employees (Least of 4 Statutory Limits)

Tax Exemption Summary

AY 2024-25 to AY 2026-27 (Statutory Limit: ₹25 Lakhs)
Tax-Free Exempt Amount
₹8,00,000
Under Sec 10(10AA)
Taxable Encashment
₹0
Added to salary income
Avg Salary / Month:₹80,000
Unutilized Leave:10.00 Months
Received Total:₹8,00,000

Section 10(10AA) 4-Test Breakdown (Least is Exempt)

Test 1: Actual Amount ReceivedAs encashed on retirement or resignation
₹8,00,000
Test 2: CBDT Statutory Ceiling₹25,00,000 minus past claims (₹0)
₹25,00,000
Test 3: 10 Months' Average Salary10 x (Basic + DA)
₹8,00,000
Test 4: Cash Equivalent of Unutilized LeaveBased on max 30 days statutory leave credit per year
₹8,00,000

This calculation is an estimate for informational purposes and does not constitute formal tax advice. Government employees enjoy full exemption under Sec 10(10AA)(i). Non-government employees are exempt to the least of the statutory 4 tests.

Frequently Asked Questions

Everything you need to know about Leave Encashment tax exemption under Section 10(10AA) of the Income Tax Act.

What is the revised tax exemption limit for leave encashment for private employees?

Vide CBDT Notification No. 31/2023 dated 24th May 2023, the maximum statutory limit under Section 10(10AA)(ii) for non-government employees was increased from ₹3 Lakhs to ₹25 Lakhs with effect from 1st April 2023 (FY 2023-24 onwards).

Is leave encashment received during continuing employment tax-free?

No. Leave encashment received while continuing in service is fully taxable as "Salary" in the year of receipt under Section 17(1) for all employees (both government and non-government). Section 10(10AA) exemption applies only upon retirement, resignation, or termination.

Are government employees completely exempt from tax on leave encashment?

Yes. Under Section 10(10AA)(i), any amount received as leave encashment at the time of retirement or superannuation by Central or State Government employees is 100% exempt from income tax without any monetary ceiling.