Can I afford to quit my job? Runway at ₹1.2 lakh a month

You can afford to quit when your liquid savings cover your monthly outgoings, plus a health policy of your own, for the whole break, and still leave an emergency fund for the search or the slow months that follow. Divide those savings by a month's outgoings and you have your runway in months: at ₹1.2 lakh a month and a ₹40,000 yearly health premium, ₹20 lakh lasts about 16 months.

Quitting also ends things the salary quietly paid for. Group health and term cover stop on your last working day, EPF contributions stop, and gratuity is due only after five years of service. The parts that are cheaper to fix before you resign are in the checklist below, and a tax year with only a few months of salary can bring back much of the tax already deducted.

How do you work out your runway in months?

Runway in months = money you can reach within days ÷ (monthly household spending + EMIs + a twelfth of the yearly health premium you will now pay yourself).

Count savings and current accounts, fixed deposits you can break, and liquid or other debt funds you can redeem in a day or two. Leave out EPF, which pays out only part of the balance at first, equity funds you would not want to sell in a falling market, and gold or property. Add any EMI that is not already in your spending, and any SIP you mean to keep running.

Then hold back an emergency fund the break does not touch. The emergency fund guide sizes it at six months of essential expenses, EMIs included, or nine to twelve months if you are the only earner in a household with dependants.

Worked example: Ananya's runway at ₹1.2 lakh a month

Ananya is 34, on a ₹25 lakh CTC, about ₹1,56,700 a month in hand (FY 2026-27, new regime, PF on full wages). She is the only earner in a family of three, which spends ₹1,20,000 a month; ₹85,000 of that is essentials such as rent, groceries, school fees, utilities and premiums. She has ₹20,00,000 in savings, deposits and a liquid fund, and wants a year off. Her own family floater with a super top-up, to replace the group policy, she prices at ₹40,000 a year.

Her runway is ₹20,00,000 ÷ (₹1,20,000 + ₹3,333) = 16.2 months. As the only earner with dependants she holds back at least nine months of essentials, ₹7,65,000, for the job search afterwards.

Each row includes the health premium, ₹40,000 paid at the start of each policy year. A full year at today's spending leaves 6.1 months of essentials, ₹2,45,000 short of the nine months she wants to hold back. She can close the gap with a nine-month break, a year on ₹95,000 a month, or by saving ₹2,45,000 more first, about 6.7 months of her ₹36,700 monthly surplus if all of it is saved.

If the break is to build a business, its costs need their own budget: the runway is for the household, not for the company.

What ends when you leave a job?

Health cover

Group health cover usually ends on your last working day, for everyone on the policy. A fresh individual policy bought after you leave usually excludes illness in its first 30 days, accidents aside, and can exclude pre-existing conditions for up to three years, the most IRDAI has allowed since 1 April 2024. There are two ways round the gap, both done before your last day: buy your own policy while you are still employed, so its waiting periods run while the group policy still pays, or ask the group insurer to migrate you to its individual or family policy, which keeps credit for waiting periods served, up to the sum insured. Before your last day, ask the insurer in writing whether it will underwrite you again for the migration, and on what terms. The insurance planning guide sizes the cover.

Term cover

Group term cover ends with the job too. Insurers ask for income proof on larger covers, so personal cover is simpler to buy while you still have a salary to show.

EPF and EPS

Contributions stop with the salary. If you leave before 55, the balance keeps earning interest, 8.25% for FY 2025-26, until you turn 58, though interest credited after your employment ends may be taxable. Under the EPF Scheme, 2026 (in force since 29 June 2026), you can take up to 75% soon after leaving and the rest only after 12 months continuously out of work. With under 10 years of EPS service, its withdrawal benefit is paid only after 36 months without a covered job. The EPF guide has the detail.

Gratuity

Gratuity is due when you leave after five years of continuous service, under the Code on Social Security, 2020, which replaced the Payment of Gratuity Act, 1972 from 21 November 2025: 15/26 of your last monthly wages for each completed year, with a part year of more than six months counted as a full year. It is tax-free up to ₹20 lakh in a lifetime (section 10(10) of the 1961 Act, section 19 of the 2025 Act). Leaving a few months short of five years can cost all of it, so check your joining date before you fix a last day.

Tax in the year you stop, and in the years after

Tax is worked out on the whole tax year's income, 1 April to 31 March. Under the new regime, the default for FY 2026-27, the rebate (section 87A of the 1961 Act) makes tax nil up to ₹12 lakh of taxable income, with marginal relief just above it.

Ananya's ₹25 lakh CTC is a gross salary of about ₹22,94,810 a year, which would be taxed at ₹2,65,151 for a full year, cess included. If her last working day is 30 September 2026, she earns about ₹11,47,400 in FY 2026-27. After the ₹75,000 standard deduction and with about ₹60,000 of bank interest, her taxable income is about ₹11.3 lakh, so her tax for the year is nil. Many employers deduct TDS each month on an estimate of the full year's salary; if hers took about ₹22,100 a month from April to September, the roughly ₹1.33 lakh comes back as a refund when she files her return for FY 2026-27, less any adjustment in her final settlement, which also adds to her income.

Two things to know about the low-income years that follow:

• The rebate does not reduce tax on listed-equity gains taxed at their own rates (the rule since FY 2025-26): long-term gains above ₹1.25 lakh a year still pay 12.5%, and short-term gains 20%.
• Interest, and gains on debt and liquid fund units bought from 1 April 2023, are taxed at your slab, so drawing on them in a year with little other income costs less tax.

If the year's tax after TDS will be ₹10,000 or more, as it can be with interest, rent or business income and no salary, advance tax is due in instalments through the year.

Career break, business, new career or early retirement

• Career break: the runway sum above, with the emergency fund kept back for the job search.
• Starting a business: keep the household's runway and the business's money apart, and plan for the business taking longer than expected to pay you. Its income is taxed in the year it is earned, usually with no TDS, so advance tax applies.
• Switching careers: a lower salary afterwards shrinks the surplus that rebuilds savings, so work out the new spending level before you switch, not after.
• Retiring early: the question becomes whether your investments can pay for your spending for the rest of your life. The FI calculator shows the year they could, from your age, spending, investments and monthly investing, and the retirement planning guide works out the corpus at a ₹25 lakh salary.

Checklist before you resign

• Work out your runway and your emergency fund as two separate numbers.
• Buy or migrate health cover while the group policy is still in force.
• Buy personal term cover while you have a salary to show.
• Check your joining date for the five-year gratuity test, your notice period and what your final settlement will include.
• Check your EPF and EPS service and what you can withdraw, and when.
• Decide which SIPs to pause or stop; units already bought stay invested.
• Note the TDS on your payslips: a short tax year may mean a refund.
• Set money aside for advance tax if income will arrive without TDS.

Planning a break, a business or an early exit? Ask for a call from a SEBI-registered investment adviser.

This is general information, not personalised tax or investment advice. The figures apply to FY 2026-27 under the new regime. Dhi is not a SEBI-registered investment adviser.