Full and Final Settlement Calculator for India

Meera earns Rs 52,000 a month, of which Rs 20,800 is basic plus dearness allowance and the rest is house rent and other allowances. She joined six years and eight months ago and resigns, working to the 13th of her final month. She has 13 days of unused earned leave, owes the company a Rs 10,000 salary advance, and her notice period is 60 days of which she serves 30. Her payroll runs on a divisor of 26.

First, the wage figure everything else sits on

Her contract basic is Rs 20,800, but that is not the base. Her excluded allowances come to Rs 31,200, which is more than half of Rs 52,000, so Section 2(88) adds the excess back. Her statutory wages are Rs 26,000, exactly half of gross. Every calculator that asks only for basic will use Rs 20,800 and be wrong by a fifth.

What she is owed

Six years and eight months counts as seven years, because service in excess of six months rounds up. Had she left two months earlier, at six years and six months, it would have counted as six and the gratuity would have been Rs 90,000. Two months of work, Rs 15,000 of gratuity. That cliff is worth knowing about before you resign rather than after.

The gratuity figure also depends entirely on which law you are running. On the old basic plus dearness allowance reading, Rs 20,800 x 15 / 26 x 7 comes to Rs 84,000. On the wage base that has applied since 21 November 2025 it is Rs 1,05,000. Meera is Rs 21,000 better off, and her employer is Rs 21,000 worse off, purely because of a definition change that most payroll software has not made.

What her employer wants back

Here is where almost every settlement sheet goes wrong. Rs 1,44,000 minus Rs 70,000 is Rs 74,000, and that is the number a spreadsheet produces and a payroll provider pays. It is not lawful.

Why the correct answer is Rs 1,05,000, not Rs 74,000

Gratuity is not a pool an employer may draw on. Section 53(6) of the Code on Social Security allows it to be forfeited in two situations and only two: damage or loss the employee caused, to the extent of that damage, and termination for riotous or disorderly conduct or an offence involving moral turpitude. Resigning without serving full notice is neither. So the recoveries may only reach the other Rs 39,000.

The cheque is Rs 1,05,000, which is exactly her gratuity, and the employer is still Rs 31,000 out of pocket. That Rs 31,000 does not disappear. It is a debt the business may pursue like any other, through a civil claim, and in practice most businesses write it off. What they may not do is take it out of the gratuity, and the naive figure of Rs 74,000 does precisely that. It short pays her by Rs 31,000.

This is not a technicality that never gets tested. It is the single most common dispute in Indian exit payments, the employee usually wins, and the employer then pays the gratuity anyway plus interest and whatever the controlling authority adds for the delay.

And it is all due by Wednesday

If Meera last worked on a Monday, the settlement is due by the end of Wednesday. Section 17(2) of the Code on Wages gives two working days from the last day, for resignation, dismissal, retrenchment and closure alike, at every salary level. Not 30 days, not 45, not the next payroll run. That has been the law since 21 November 2025, and Section 54 puts the first late payment at a fine of up to Rs 50,000.

A settlement now draws on two Codes rather than five Acts. Both came into force on 21 November 2025, and between them they changed the deadline, the gratuity base and the rules on fixed term staff in the same week.

• Section 17(2), Code on Wages sets the deadline at two working days from removal, dismissal, retrenchment, resignation or closure. There is no carve out for senior staff, notice period disputes or pending clearances, and Section 54 puts a first offence at up to Rs 50,000.
• Section 2(88), Code on Social Security is the wage definition, with the 50 percent add back. It is the same clause that raised provident fund costs, and it applies to gratuity and leave encashment too. This is the change with the largest rupee effect on a settlement and the one least reflected in payroll software.
• Section 53 carries gratuity. Subsection (2) qualifies permanent employees at five years and fixed term employees at one year pro rata. Subsection (3) caps it at Rs 20 lakh, unchanged since 29 March 2018. Subsection (6) is the only route to forfeiture and it is narrow.
• Section 2A of the repealed Payment of Gratuity Act, carried forward in substance, is where the four years and 240 days argument lives. High Courts differ. There is no settled national position.
• Section 10(10AA), Income Tax Act exempts leave encashment on resignation or retirement up to Rs 25 lakh for a non government employee, a lifetime aggregate across all employers, raised from Rs 3 lakh with effect from 1 April 2023.

One point where the law is genuinely unsettled and this page does not pretend otherwise. Section 18 of the Code on Wages caps total deductions at 50 percent of wages, and whether a settlement counts as wages for that purpose, and whether gratuity counts at all, has not been tested. This calculator applies the narrower and safer rule instead: recoveries may take the whole of the non gratuity balance, and none of the gratuity. An employer wanting to be conservative should stop at half.

Notice pay in the other direction, where the employer waives the notice period and pays for it, is contractual rather than statutory. So is the basis on which a shortfall is recovered. Most contracts say gross and some say basic, and the difference on a 30 day shortfall at Rs 52,000 a month is around Rs 36,000. Read the contract before assuming.