A worked example: ₹7.2 lakh annual Basic+DA, 20 unused days
An employee with ₹7,20,000 in annual Basic + DA and 20 unused leave days receives a daily rate of ₹2,307.69 and a total encashment of ₹46,153.85.
The formula: monthly Basic+DA ÷ 26, then × unused days
Annual Basic + DA is first divided by 12 to get the monthly figure (₹7,20,000 ÷ 12 = ₹60,000), then by 26 working days to get the daily rate (₹60,000 ÷ 26 = ₹2,307.69). Multiplying by 20 unused days gives ₹2,307.69 × 20 = ₹46,153.85 — the same /26 divisor convention used for gratuity, rather than the 30 calendar days in a month.
A larger example: ₹10.8 lakh annual, 45 unused days
A higher annual Basic + DA of ₹10,80,000 with 45 unused days scales the same way: a daily rate of ₹3,461.54 (₹10,80,000 ÷ 12 ÷ 26) and a total encashment of ₹1,55,769.23 (₹3,461.54 × 45) — the daily rate rises with salary, and the total rises with both salary and unused days.
Why the divisor convention matters
Using 26 working days rather than 30 calendar days produces a higher daily rate, and therefore a higher encashment, for the same annual Basic + DA — some employers instead use a /30 divisor, which would give a smaller daily rate for identical inputs. Checking which convention an employer's policy uses matters before comparing figures.