Severance Pay and Full and Final Settlement Calculator

Add up what the employer owes on the last day: the salary for the days worked in the last month, notice pay if you are relieved without serving the notice, the severance package, leave encashment (the days at credit × a day’s pay, usually basic ÷ 30), gratuity after five years (15 days’ wages for each year, a month counted as 26 days) and any bonus due. Tax is deducted on the taxed part. For a manager on ₹1.9 lakh a month laid off after 6 years 9 months with two months’ notice pay and three months’ severance, it comes to ₹17,22,821, of which ₹4,62,821 is tax-free.

Only for a “worker” under the Industrial Relations Code, 2020: one month’s notice or a month’s wages in its place, and compensation of 15 days’ average pay for every completed year of service, a part above six months counting as a year, once the worker has served a year (section 70). In an establishment with 300 or more workers the notice is three months and the Government’s permission is needed (section 79). A manager or administrator, or a supervisor earning more than ₹18,000 a month, has no severance by law; the contract and the company’s policy decide it. Gratuity after five years is due to everyone.

Yes. Section 18 of the Income-tax Act, 2025 taxes compensation on the termination of a job as salary, at your slab rate. Section 19 has two exceptions: a worker’s retrenchment compensation is tax-free up to the least of the amount, 15 days’ average pay for each year of service and ₹5 lakh; and a voluntary retirement payment under a scheme that meets Rule 20 is tax-free up to ₹5 lakh, once in a lifetime.

Yes, in full, as salary, under both the new and the old regime. Notice pay is the salary for a notice period you are not asked to work, and no exemption covers it.

Partly. Leave encashed on leaving a private job is tax-free up to the least of the amount paid, 10 months’ average basic and DA, the value of the leave at credit counting no more than 30 days for each year of service, and ₹25 lakh over your working life (section 19, Table Sl. No. 14). The rest is taxed as salary. The exemption is available under the new regime too.

Not under the Code on Social Security, which needs five years of continuous service except on death or disablement; a fixed-term employee is paid pro rata after one year. Your employer may pay it earlier under its own policy. After five years it is 15 days’ wages for every year, a part above six months counting as a year, a month taken as 26 days, up to ₹20 lakh: ₹3,83,654 on ₹95,000 of wages and 6 years 9 months.

The final wages within two working days of the retrenchment, resignation or closure (Code on Wages, section 17(2)), for every employee; a worker’s retrenchment compensation at the time of retrenchment (Industrial Relations Code, section 70); gratuity within 30 days of it falling due, with interest after that (Code on Social Security, section 56); and, for a retrenched worker, 15 days’ wages from the re-skilling fund within 45 days (section 83).

Anyone employed to do manual, unskilled, skilled, technical, operational, clerical or supervisory work, except people employed mainly in a managerial or administrative capacity and supervisors earning more than ₹18,000 a month (section 2(zr)). What you mainly do decides it, not the title: a developer, tester or analyst with no one reporting to them can be a worker on a large salary, and the tax on the severance can fall sharply as a result (₹96,700 in the example on this page).

15 days’ average pay for every completed year of continuous service, and for any part of a year above six months (Industrial Relations Code, section 70(b)). Average pay is the wages of the last three complete months; wages are basic, DA and retaining allowance, with the other parts added back where they come to more than half the pay. The calculator takes a month as 26 working days, as for gratuity: 15 × ₹95,000 ÷ 26 × 7 years = ₹3,83,654.

Up to ₹5 lakh, once in a lifetime, if the scheme meets Rule 20 of the Income-tax Rules, 2026: it is open to employees with 10 years of service or aged 40, applies to all employees except directors, brings down the overall headcount, the vacancy is not filled and the employee is not re-employed in a company under the same management; and the payment is no more than three months’ salary for each completed year of service or the salary for the months left to retirement, whichever is less. The rest is taxed as salary.

Not if you have five years of PF membership, counting earlier jobs whose PF you transferred. Before five years it is still tax-free when the service ended through the contraction or closure of the employer’s business or another cause beyond your control, which covers being laid off (Income-tax Act, 2025, Schedule XI, paragraph 8). Otherwise the withdrawal is taxed, and 10% TDS applies to ₹50,000 or more (section 392(7)).

After 12 months without a job, under the EPFO board’s decisions of 13 October 2025 (it was two months before), and the pension balance after 36 months. Before that you can make a partial withdrawal, but 25% of the contributions must stay in the account.

A fund under section 83 of the Industrial Relations Code, set up by notification S.O. 2316(E) of 8 May 2026. For every worker it retrenches, the employer pays 15 days’ last-drawn wages into the fund, which credits that amount to the worker within 45 days of the retrenchment, on top of the compensation.

Notice and compensation as if retrenched: a month’s notice or a month’s wages, and 15 days’ average pay for every year of service (Industrial Relations Code, section 75(1)). If the closure is forced by circumstances beyond the employer’s control, the compensation is capped at three months’ average pay; losses, unsold stock or the end of a lease do not count as such circumstances. A plant worker on ₹42,000 a month with 10 years 4 months is owed ₹3,51,077 in notice, compensation and gratuity.

Give the new employer Form 122 (the old Form 12B) with the salary and settlement already paid this tax year (section 392(4)(a)), so that it deducts tax on your whole income. If you do not, it deducts only on its own salary and the balance falls due when you file. In the example on this page, three months at ₹20 lakh a year add ₹1,52,100 of tax, and the new employer, told nothing, would deduct ₹0.

It can. Section 157 of the Income-tax Act, 2025 gives relief when salary for past years, or compensation on leaving a job, is taxed in one year, by reworking the tax as if it had been received over the years it relates to. Rule 73 of the Income-tax Rules, 2026 sets the method and conditions, and the claim is made on Form 39, the old Form 10E. It cannot be claimed on a voluntary retirement payment whose exemption you take. The calculator does not compute it.

Under the labour codes, wages include basic pay, DA and retaining allowance, and leave out HRA, conveyance, overtime, commission and some other parts; but if the parts left out come to more than half the pay, the excess counts as wages. On a ₹1 lakh salary with ₹30,000 of basic and DA, ₹20,000 is added back, so gratuity, notice wages and retrenchment compensation are worked out on ₹50,000. The calculator treats everything you enter outside basic and DA as left out.