Resigning in India: notice period, gratuity and full and final settlement

Quick answer: Serve the notice period in your appointment letter, or agree an earlier release in writing. Collect your relieving letter, experience certificate, final payslips and a written full and final statement. If you're a permanent employee with 5 years of continuous service, you get gratuity of 15 days' wages for each year of service (last basic + DA × 15 ÷ 26 × years), up to ₹20 lakh. Fixed-term employees qualify after 1 year. Under the Code on Wages, 2019, your dues should be paid within two working days of your last day, and gratuity within 30 days of it becoming due.

Resigning should take one email. In practice it takes weeks of follow-ups: notice, handover, the settlement and the documents for your next job. This guide puts it all in one place.

1. Resign the right way

• Write it down. Send your resignation by email to your manager and HR, and keep a copy. Mention your last working day as per your notice period.
• Ask for written acceptance. The acceptance email or letter fixes your last day. That date decides your notice, your settlement and, sometimes, whether you cross a gratuity year.
• Check your appointment letter. It sets your notice period (often 30, 60 or 90 days, sometimes shorter during probation) and whether notice can be bought out.

Leaving early. You have three common options. The employer agrees to an early release. You buy out the notice by paying, or having deducted, the salary for the days you don't serve, if your contract allows it. Or the employer puts you on garden leave: you stay on the payroll but don't work. Whatever you agree, get it in writing.

Watch the date. If you are a few weeks short of 5 years of service, or of a year that would round up your gratuity, check before you pick your last day.

2. Your document checklist

Before your last day, make sure you have, or have asked for:

• Resignation acceptance, with the agreed last working day.
• Relieving letter. Your next employer will usually ask for it.
• Experience or service certificate, with your role and dates.
• Last three payslips.
• Full and final statement: a written breakup of everything paid and deducted.
• No-dues or clearance confirmation, and an acknowledgement for the laptop, ID card and anything else you return.
• Form 16 (your TDS certificate) for the year. It usually comes after the financial year ends, so note who to ask.
• Provident fund. Check that your exit date is updated on the EPFO portal against your UAN. Then transfer the balance to your new employer, or withdraw it if you're not joining one. Full withdrawal is allowed after two months without a job.
• Gratuity application, if you're eligible (see below). Keep the email.
• ESOPs or stock options. Note the deadline to exercise vested options after you leave.

3. Gratuity: are you eligible?

Gratuity comes from the Payment of Gratuity Act, 1972, now part of the Code on Social Security, 2020. It applies to employers with 10 or more employees.

• Permanent employees qualify after 5 years of continuous service, when they resign, retire or are let go.
• Fixed-term employees qualify after 1 year, and get gratuity in proportion to the time served.
• On death or disablement, gratuity is paid whatever the length of service.
• 4 years and 240 days. Some High Courts have counted 4 years plus 240 days worked in the fifth year as 5 years of continuous service. It isn't settled everywhere, so get advice if this is you.

Gratuity can be held back only in limited cases. These include termination for misconduct that caused the employer a loss (up to the amount of the loss), and serious misconduct such as violence. A resignation on its own is never a reason to refuse it.

4. How much gratuity you get

The formula for employers covered by the law is:

Gratuity = last monthly wages × 15 ÷ 26 × years of service

• Wages means your basic pay plus dearness allowance (DA). Under the new labour codes, if allowances such as HRA make up more than half of your total pay, the extra counts as wages. That can raise your gratuity.
• Years of service: a part year of more than six months counts as a full year. So 6 years and 7 months counts as 7 years, but 6 years and 6 months counts as 6.
• Maximum: ₹20 lakh.

Example: basic + DA of ₹40,000 and 6 years 8 months of service. Gratuity = 40,000 × 15 ÷ 26 × 7 = ₹1,61,538.

If your employer has fewer than 10 employees, the law doesn't require gratuity, though some pay it anyway. Then a formula of 15 ÷ 30 per completed year is often used.

Move the sliders to estimate yours, and use the second tab to estimate your whole settlement:

Tax. For private-sector employees, gratuity is usually tax-free up to ₹20 lakh across your working life. Anything above that is taxed as salary. Ask your CA if you've received gratuity before.

5. Full and final settlement: what's in it

Your full and final (F&F) settlement usually includes:

• Salary for the days worked in your last month.
• Leave encashment for unused earned leave, as your policy allows. It's usually paid on basic + DA, and some companies use gross pay.
• Bonus or variable pay that's due.
• Reimbursements you've claimed.
• Gratuity, if you're eligible.

From this, the employer may deduct:

• Unserved notice, if your contract allows a buyout.
• Loans, advances or other recoveries you agreed to.
• Tax (TDS).

6. How long full and final takes

• The law: under the Code on Wages, 2019, when an employee resigns, the wages due must be paid within two working days of the last working day.
• Gratuity: the employer must work it out and pay it within 30 days of it becoming due. If it's late, it has to pay interest.
• In practice: many companies still run F&F in their next payroll cycle, often 30 to 45 days later. Ask HR for a written date and the breakup.

7. If your settlement or documents are late

1. Email HR with a clear list: each amount and document, and a date to reply by (say 7 days).
2. Escalate to the HR head or your former manager, copying the first email.
3. Send a legal notice. It often settles things quickly. See how to send a legal notice.
4. Go to the labour authority. Unpaid wages and gratuity claims can be taken to the labour department. Gratuity disputes go to the Controlling Authority under the gratuity law.

An employer shouldn't hold back your relieving letter or experience certificate to force you to pay a disputed amount. Raise the dispute in writing rather than paying something you don't owe.

Frequently asked questions

How is gratuity calculated in India?

Last monthly basic pay plus DA × 15 ÷ 26 × years of service. A part year over six months counts as a full year. The maximum is ₹20 lakh.

Can I get gratuity before 5 years?

Permanent employees generally need 5 years of continuous service. Exceptions are death or disablement, and fixed-term employees, who qualify after 1 year. Some High Courts have counted 4 years and 240 days as 5 years.

How long does full and final settlement take?

The Code on Wages, 2019 says wages due on resignation must be paid within two working days of the last day. Gratuity must be paid within 30 days of becoming due. Many companies take 30 to 45 days in practice, so ask for a written date.

Can my employer hold my salary if I don't serve the full notice?

If your contract allows it, they can deduct salary for the notice days you don't serve. They shouldn't hold back your other dues or your documents without a reason.

Which documents should I collect when I resign?

Resignation acceptance, relieving letter, experience certificate, last three payslips, a written full and final statement, a no-dues confirmation, Form 16, and your PF exit date updated on EPFO.

Not sure about your own case?

Paste your notice clause or your full and final statement into Ask April. April explains it in plain words and tells you what to ask HR. Before you sign the next one, read the offer letter red flags.

This article is general information, not legal or tax advice. Labour rules can vary by state and by type of establishment, and your appointment letter and company policy matter.