The notice period is calculated based on CTC per day , multiplied by the number of remaining working days.
Any leave taken during this duration will push the date of release by a day.
Please refer the exit policy at your firm. Ideally, the calculation is mentioned in there. Wish you all the best!
1. If an employee has given three month's notice as per the letter given to him, where is the question of deduction? You will relieve him at the end of third month and you would have paid salary to him for all these three months
2. If an employee resigns saying that he may be relieved with immediate effect and he is prepared to pay the Notice Period , then normally there are two practices in vogue. (a) Recover only Basic Plus DA (b) Recover monthly salary and exclude all calculations of annual payments. My advice is if you have leave encashment policy and if as per the policy if you are paying only Basic, then you should follow the same here as well. Alternatively, if you are paying full salary for leave encashment, then follow the same practice for notice pay calculation as well. If you do not have any such Policy in leave encashment, debate and evolve a policy.
3. If an employee gives partial notice say 30 days, then you need to recover only for balance 60 days.