Central government employees can encash up to 300 days of earned leave at retirement. The amount is based on basic pay plus dearness allowance (DA) on the date of retirement, divided by 30.
Use the leave encashment calculator for a quick figure, or follow the steps below.
The formula
Leave encashment = (Basic pay + DA) ÷ 30 × earned leave days (maximum 300)
- Basic pay: the pay in the pay matrix on the last day of service.
- DA: the dearness allowance rate applicable on that date, applied to basic pay.
- Leave days: earned leave balance at retirement, capped at 300.
HRA, transport allowance and other allowances are not included.
HR, GPS attendance, shifts, leave, payroll, tax declarations, onboarding, engagement, projects and timesheets — one employee record behind all of it.
Start free See the demoExample 1: full 300 days
- Basic pay: ₹78,800
- DA at an assumed 55%: ₹43,340
- Basic + DA: ₹1,22,140
Leave encashment = ₹1,22,140 ÷ 30 × 300 = ₹12,21,400
Example 2: 180 days balance
- Basic pay: ₹56,100
- DA at an assumed 55%: ₹30,855
- Basic + DA: ₹86,955
Leave encashment = ₹86,955 ÷ 30 × 180 = ₹5,21,730
DA rates change twice a year, so always use the rate in force on the retirement date.
Tax treatment
| Employee type | Leave encashment at retirement |
|---|---|
| Central and state government | Fully exempt |
| Private sector and PSU | Exempt up to the notified limit (currently ₹25 lakh lifetime), subject to conditions |
Leave encashed while in service is taxable as salary for everyone.
Private-sector comparison
Private employers follow their own leave policy. Many use basic (sometimes basic + DA) ÷ 26 or ÷ 30 per day. See leave encashment calculation for private-company formulas, including the 26-day method.
Records that matter at retirement
- The leave account with year-wise earned leave credits and debits.
- Last pay certificate showing basic pay and DA.
- Any LTC encashment already availed, which reduces the earned leave balance where applicable.
MizUp's HR and payroll keeps a running leave ledger per employee, so the balance at exit is not a reconstruction exercise.
Summarised from the CCS (Leave) Rules and income tax provisions. DA rates in examples are assumptions. Verify with your pay office.
Frequently asked questions
What is the formula for leave encashment for central government employees?
Leave encashment = (basic pay + dearness allowance on the date of retirement) ÷ 30 × number of earned leave days, subject to a maximum of 300 days.
What is the maximum leave that can be encashed?
Up to 300 days of earned leave (and half pay leave as per the rules) on retirement.
Is leave encashment taxable for central government employees?
Leave encashment received at retirement by central and state government employees is fully exempt from income tax.
Is HRA included in leave encashment?
No. Only basic pay and dearness allowance are used.
