For non-government employees the exemption is the least of: amount received; ₹25 lakh; 10 months’ average salary; cash equivalent of unavailed leave (max 30 days per year of service). Government employees’ encashment is fully exempt. Encashment while in service is fully taxable.
FAQ
What is the leave encashment exemption limit?
₹25 lakh for non-government employees on retirement or resignation.
Sources (checked 6 Nov 2026): Income-tax Act; CBDT notification raising the limit to ₹25 lakh (2023).