What is Leave encashment?
Short answer
Leave encashment is payment for earned leave an employee has not used, usually at exit or year end, as the company policy allows.
How it is paid
- The unused earned-leave days are multiplied by a per-day wage.
- Under the labour codes the per-day wage is based on statutory wages.
- At exit it is part of the full and final settlement.
In AdviHR
AdviHR calculates leave encashment in the final settlement on statutory wages.
Frequently asked questions
Is leave encashment taxable?
It is salary income; the tax treatment at retirement or resignation has its own limits, so check with your tax adviser.
Related terms
How sure are we? These figures use the same rules AdviHR payroll applies. We publish what has been checked against an official source and what has not, on the statutory accuracy page.
General information, not legal or tax advice. Confirm against the official notification and your adviser.