Earned Leave is the principal full-pay leave category for Central Government employees in non-vacation departments. It is regulated by Rule 26 of the CCS (Leave) Rules, 1972 and runs in parallel with the calendar year. This article covers how EL accrues, the 300-day accumulation ceiling, the encashment provisions during service and at retirement, and how the encashment amount is taxed.
How EL is credited
EL is credited in advance, in two instalments of 15 days each, on 1 January and 1 July of every calendar year. The credit happens irrespective of whether the employee was actually on duty during the preceding half-year, with two adjustments:
- If the employee was on EOL during any part of the preceding half-year, the EL credit for the next half-year is reduced at the rate of 1/10th of the period of EOL, subject to the maximum of 15 days.
- If the employee was on dies-non (a period not counting as duty), a similar reduction may apply per the leave sanctioning authority’s order.
Joining mid-year
An employee joining the service in the middle of a half-year earns EL at 2.5 days per completed calendar month of service in that half-year, credited at the end of the half-year, not on 1 January or 1 July of that period.
Retiring mid-year
An employee retiring before completing the full half-year is credited 2.5 days for each completed calendar month from the last credit date to the date of retirement. Fractions of more than half a day are rounded up.
The 300-day ceiling
The maximum accumulation of EL is 300 days. Once the leave account reaches 300 days, further credits are not added unless the balance falls below 300. There is, however, a small concession: the half-yearly credit can take the balance up to 315 days for a period of six months (until the next 1 January or 1 July), but the balance must drop to 300 by the credit date or the excess lapses.
Practical implication: if you are at or near 300 days, plan to use at least the half-yearly credit each cycle, or you risk losing it.
EL encashment with LTC
Under the EL-with-LTC scheme, an employee can encash up to 10 days of EL at the time of availing Leave Travel Concession. This is over and above the LTC fare reimbursement. Conditions:
- Lifetime ceiling: 60 days during entire service.
- Each instance of encashment can be a maximum of 10 days.
- The encashed days are deducted from the leave account, but the days are also reckoned against the 300-day retirement encashment ceiling — i.e. the retirement entitlement reduces by the days already encashed.
- Available with LTC for self only or for self plus family; the employee can also be on EL during the LTC.
EL encashment at retirement
At superannuation, voluntary retirement, or invalidation, an employee is entitled to encashment of EL standing to credit, subject to the maximum of 300 days. Death in service: full credit balance is encashable to the legal heir.
Computation
Encashment amount = (last basic pay + DA on last day of service) × number of days credit / 30. The “30” denominator treats the encashment as if it were monthly salary for the credit period. Worked example:
- Last basic pay: Rs. 56,100 (Level 10 entry).
- DA at 60% on retirement: Rs. 33,660.
- Daily reckoning: (56,100 + 33,660) / 30 = Rs. 2,992.
- EL credit at retirement: 285 days.
- EL encashed earlier with LTC over the years: 30 days.
- Eligible for encashment at retirement: min(285, 300 − 30) = 270 days.
- Encashment amount: 270 × 2,992 = Rs. 8,07,840.
Taxation of EL encashment
Under section 10(10AA) of the Income Tax Act, encashment of EL at retirement is fully exempt from tax for Central Government employees. This is unconditional: the entire amount is tax-free regardless of the basic pay or the number of days encashed (the 300-day limit is a leave-rule cap, not a tax cap). Note that the parallel exemption for non-Government employees is capped (currently Rs. 25 lakh under section 10(10AA)(ii) following the 2023 amendment); the Central Government employee exemption is on a separate footing.
EL encashed during service (along with LTC) is taxable as salary. There is no exemption for in-service encashment.
Vacation department employees
Employees of vacation departments (e.g. educational institutions, certain courts) earn EL at a reduced rate because they are entitled to vacations. The current entitlement for vacation department employees is 10 days per year (5 + 5 on 1 January and 1 July). The 300-day ceiling applies, and encashment provisions are the same.
Frequently asked questions
Will the 8th CPC raise the 300-day ceiling?
Employee bodies have demanded 400 days. No recommendation has been made yet. Plan as if the ceiling stays at 300 until officially revised.
Can I encash EL beyond 10 days at the time of LTC?
No. The cap per LTC encashment is 10 days. The lifetime cap is 60 days across all in-service encashments.
What if I forget to apply for EL encashment with LTC?
The application must be submitted along with the LTC claim. Late requests are at the discretion of the head of department; in practice, claims submitted within 30 days of the LTC are usually entertained.
Does EL count for pension and gratuity?
EL counts as duty for service computation. EL encashment does not augment the pension or gratuity calculation; it is a one-time payment for the unused leave balance.
Sources
- CCS (Leave) Rules, 1972, Rule 26 (Earned Leave).
- DoPT OM No. 14028/3/2008-Estt(L), dated 31 March 2009 (10 days encashment with LTC).
- Income Tax Act, 1961, section 10(10AA).
- FR 9 and SR 19 (definitions used in leave salary computation).