Full and Final Settlement Letter Format
Prepare the statement of an employee's final dues on resignation, retirement or termination, with earnings, recoveries and the net amount.
Law version: TDS certificate: Up to FY 2025-26 (Income-tax Act, 1961); Tax Year 2026-27 onwards (Income-tax Act, 2025). Checked on 26 Sep 2026.
What it is
When an employee leaves, the employer settles all amounts due: salary for the days worked, encashment of unused leave, bonus, gratuity where eligible and reimbursements, less recoveries such as notice pay shortfall, advances and tax deducted at source. The full and final (F&F) settlement letter records this computation so the employee can check it and both sides have a record.
When it is used
- An employee resigns, retires or is terminated or retrenched.
- A fixed-term contract ends.
- Paying final dues to the legal heirs of a deceased employee.
What the template covers
- Employee details, date of joining, reason for separation and last working day
- Earnings: salary for days worked, leave encashment, bonus, gratuity, reimbursements
- Deductions: notice pay recovery, advances, unreturned assets, TDS, PF
- Net amount payable in figures and words
- Payment mode and date, and the employee's acknowledgement
Details you will need
The generator asks for the following. Fields marked with an asterisk in the form are required; the rest can be left blank and filled in later in Word.
Letter Details
Date of Letter; Reference No.
Employer
Company / Employer Name; Registered / Office Address; Authorised Signatory Name; Signatory Designation
Employee
Employee Full Name; Employee ID; Last Designation; Department; Employee PAN; Employee Address (for correspondence); UAN (EPF)
Separation
Date of Joining; Reason for Separation; Date of Resignation / Termination Letter; Last Working Day
Earnings (₹)
Salary: Days Payable in Final Month; Salary for Days Worked (gross); Leave Encashment: Days; Leave Encashment Amount; Bonus / Incentive (pro-rata); Gratuity; Gratuity Amount; Reimbursements Due; Other Earnings; Description of Other Earnings
Deductions (₹)
Notice Period Shortfall (days); Notice Pay Recovery; Salary Advance / Loan Outstanding; Recovery for Company Assets Not Returned; Assets Not Returned (description); Income-tax Deducted at Source (TDS); Employee PF Contribution (final month); Professional Tax; Other Deductions; Description of Other Deductions
Payment
Mode of Payment; Date of Payment; Employee Bank Name; Bank Account: Last 4 Digits; Cheque / UTR No.; Days to Pay (if amount is recoverable)
Stamp duty, registration and filing
Under the Code on Wages, 2019 (in force from 21 November 2025), wages due on removal, dismissal, retrenchment or resignation are payable within two working days. Gratuity is governed by the Code on Social Security, 2020 and is payable on completing five years of continuous service (one year for fixed-term employees). Deductions must be ones the law and the employment terms permit, and TDS on salary is deducted under the Income-tax Act, 2025 from tax year 2026-27.
The TDS certificate named in the letter follows the year in which the settlement is paid (the payment date, or the date of the letter if no payment date is given): Form 16 for FY 2025-26 and earlier, Form No. 130 from Tax Year 2026-27.
Generate the Full & Final Settlement Letter
Fill in the form and download the draft as a Word file. It is a general template, not legal or professional advice; have it reviewed for your facts before you sign or rely on it.
Need this checked against your facts, or the registration or filing that follows (e.g. PF, ESI, TDS on salary)? Contact SKAG and Associates
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Frequently asked questions
How soon must the full and final settlement be paid?
The Code on Wages, 2019 requires wages due on separation to be paid within two working days. Many employers also follow their own policy for other components; check that it does not delay statutory dues.
Is gratuity part of the F&F settlement?
Yes, where the employee is eligible: five years of continuous service, or one year for a fixed-term employee under the Code on Social Security, 2020.
Can the employer recover notice pay?
Yes, if the employee did not serve the notice period required by the appointment letter, the shortfall can be recovered as agreed in the employment terms.
This page gives general information for reference only. Laws, stamp duty rates and filing requirements change and differ between States, so confirm the current position for your case. Related: all document templates · free tax calculators · compliance calendar and guides.