How to use the notice period buyout calculator
- Enter your notice period and the days you will serve before your last working day.
- Enter your monthly basic and gross pay and choose the basis your policy uses.
- Choose whether one day's pay is monthly pay ÷ 30 or ÷ the days in the month.
- If your policy allows it, enter your leave balance and set it against the notice.
- If the new employer reimburses the buyout, pick the share and your tax slab to see your net cost.
How the buyout is worked out
Buyout = (notice days − days served − leave set off) × monthly pay ÷ 30
Example: a 90-day notice period with 30 days served leaves 60 days. On ₹50,000 basic pay, one day costs ₹1,667 and the buyout is ₹1,00,000. On ₹1,00,000 gross pay it is ₹2,00,000.
If your employer divides by the days in the month and you leave in February, one day costs ₹1,786 and the same buyout is ₹1,07,143.
Buyout for common notice periods
If none of the notice is served, on ₹50,000 basic and ₹1,00,000 gross pay a month.
| Notice not served | On basic pay | On gross pay |
|---|---|---|
| 30 days | ₹50,000 | ₹1,00,000 |
| 45 days | ₹75,000 | ₹1,50,000 |
| 60 days | ₹1,00,000 | ₹2,00,000 |
| 90 days | ₹1,50,000 | ₹3,00,000 |
Final settlement and tax
- The buyout is usually deducted from your full and final settlement, along with any other recoveries.
- Leave set against the notice is no longer encashed, so the saving on the buyout is partly a lower leave encashment. See the leave encashment calculator.
- A reimbursement from the new employer is taxable salary from the new employer.
- Whether the recovery reduces the salary taxed by the old employer is disputed; tribunal rulings differ. Ask your employer how it is shown in Form 16, and check with a tax adviser.
- Your notice period and buyout terms come from your contract and HR policy, so check both before you resign.
Frequently asked questions
How is the notice period buyout calculated?
Buyout = days not served × monthly pay ÷ 30. With 90 days' notice and 30 days served, 60 days are left; on ₹50,000 basic pay that is ₹1,00,000. Some employers divide by the days in the month instead of 30.
Is notice period buyout calculated on basic or gross salary?
It depends on your employer's policy, which is in the offer letter or HR handbook. On gross pay it costs much more: in the example above, ₹2,00,000 on gross against ₹1,00,000 on basic.
Can I adjust earned leave against my notice period?
Many policies allow it, though some do not, or allow it only with the manager's approval. Setting 20 days of leave against a 60-day shortfall cuts the buyout to ₹66,667, but you give up about ₹33,333 of leave encashment.
Is a notice period buyout reimbursed by the new employer taxable?
Yes. A reimbursement from the new employer, often paid as a joining bonus, is taxable salary from that employer. At a 30% slab, a full reimbursement of ₹1,00,000 carries about ₹31,200 in tax.
Can I deduct the notice pay recovered by my old employer from my taxable salary?
The law does not say so directly, and tribunal rulings have gone both ways. Ask your employer how the recovery is shown in Form 16, and check with a tax adviser before claiming it in your return.
What if I cannot pay the notice period buyout?
The buyout is usually recovered from your full and final settlement: pending salary, leave encashment and other dues. If those are smaller than the buyout, the employer may ask you to pay the difference before issuing the relieving letter.