Leave Encashment Calculator for Bank Employees (2026)
Calculate your leave (PL) encashment and its tax treatment as a PSU bank employee. Select whether you’re encashing leave at retirement, on resignation, or while still in service, enter your accumulated Privilege Leave days, Basic Pay and DA — the calculator shows the gross amount, the exempt portion under Section 10(10AA)(ii), and what’s actually taxable.
- Formula: (Basic + DA) ÷ 30 × number of PL days encashed
- Exemption: at retirement/resignation, least of 4 limits under Section 10(10AA)(ii)
- Statutory ceiling: ₹25,00,000 — a lifetime limit across all employers, not per job (CBDT Notification 31/2023, effective 1 April 2023)
- Max encashable PL: 240 days at retirement, per IBA bipartite settlement norms
- While in service: fully taxable — no exemption applies at all
| Basic + DA | — |
| Per-day pay (Basic+DA ÷ 30) | — |
| Gross Leave Encashment | — |
| 1. Actual leave encashment received | — |
| 2. Statutory ceiling (lifetime, across all employers) | — |
| 3. 10 months' average salary (Basic+DA) | — |
| 4. Cash equivalent of leave at credit (capped at 240 days) | — |
| Exempt amount | — |
| Taxable amount (added to salary income) | — |
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How Leave Encashment Tax Exemption Is Calculated
At retirement or resignation, leave salary is exempt under Section 10(10AA)(ii) of the Income Tax Act — but only up to the least of four separate limits:
In practice, for almost every bank employee, limits 1 and 4 turn out to be identical and are what actually bind — because the bipartite settlement’s own 240-day encashment cap means you can never accumulate an “actual amount received” larger than the 240-day cash equivalent. The ₹25 lakh ceiling and the 10-month-salary test are pitched high enough that only unusually senior, high-pay cases would ever reach them. If you left an earlier job and already claimed part of your ₹25 lakh lifetime exemption there, that portion is no longer available here — track it with your tax advisor.
Leave Encashment While Still in Service
None of the exemptions above apply if you encash leave while still employed. For non-government employees — which includes PSU bank staff — leave encashed during service is added in full to your salary income under Section 17(1) and taxed at your slab rate, with no exemption at all. This is a common point of confusion: many employees assume the same ₹25 lakh ceiling protects any leave encashment, but it only applies at the point of retirement, resignation, or similar cessation of employment — not to periodic encashment while you’re still working.
Worked Example — At Retirement
A Scale II officer retires with Basic Pay of ₹93,960 and DA of 27.83%, giving Basic+DA of ₹1,20,109 and a per-day rate of ₹4,004. Encashing the full 240 days of accumulated PL gives a gross leave encashment of ₹9,60,874. Checking the four limits: actual amount ₹9,60,874; statutory ceiling ₹25,00,000; 10 months’ average salary ₹12,01,091; cash equivalent at 240 days ₹9,60,874. The least of these is ₹9,60,874 — so the entire amount is exempt from tax, and nothing is taxable.
Frequently Asked Questions — Leave Encashment Calculator
How is leave encashment calculated for bank employees?
Leave encashment is calculated as (Basic Pay + DA) ÷ 30 × number of Privilege Leave (PL) days encashed. For PSU bank employees, the number of days that can be encashed at retirement is capped at 240 days under IBA bipartite settlement norms.
Is the ₹25 lakh leave encashment exemption per job or a lifetime limit?
The ₹25,00,000 exemption ceiling under Section 10(10AA)(ii) is a lifetime aggregate limit across all employers you have worked for — not a fresh ₹25 lakh available at every job. If you already claimed a leave encashment exemption at an earlier employer, that amount is deducted from your remaining ₹25 lakh ceiling when you claim the exemption again at a later retirement or resignation.
Is leave encashment taxable if I encash it while still working?
Yes. Leave encashed while still in service (not at retirement, resignation, or similar cessation of employment) is fully taxable for non-government employees, including PSU bank staff. It is added to your salary income under Section 17(1) and taxed at your applicable slab rate — none of the Section 10(10AA)(ii) exemption limits apply to leave encashed during active service.
What is the maximum number of PL days a bank employee can encash?
Under IBA bipartite settlement norms, PSU bank employees can encash a maximum of 240 days of accumulated Privilege Leave (PL) at the time of retirement. This 240-day cap also effectively becomes the binding limit in the four-limit tax exemption test, since it limits the maximum “actual amount received” you could ever have.
Was the leave encashment exemption limit recently increased?
Yes. The exemption ceiling under Section 10(10AA)(ii) was raised from ₹3,00,000 to ₹25,00,000 via CBDT Notification No. 31/2023, dated 24 May 2023. The increase was applied retrospectively, effective from 1 April 2023, so it covers retirements and resignations from that date onward.
Does the leave encashment exemption apply on resignation, or only on retirement?
Section 10(10AA)(ii) covers leave salary received on “retirement, whether on superannuation or otherwise” — this wording, along with established tax practice, extends the exemption to resignation as well, not just formal superannuation retirement. It does not, however, cover leave encashed periodically while you continue to be employed.