To obtain a good dynamic control performance of permanent magnet synchronous motor (PMSM) drives, four sensors (one position, one DC-link voltage and at least two current sensors) are required for the control-loops. This paper deals with the unpredictable faults that occur in any one of the sensors using an advanced fault-Tolerant control (FTC) scheme to provide continuous drive operation. The proposed FTC scheme comprises of two higher-order sliding mode (HOSM) observers and one Luenberger observer (LO) to generate the respective residuals, and provide the detection of all sensor faults. Moreover, HOSM controllers are designed to ensure finite-Time convergence of the error trajectories. The designed scheme minimizes existing chattering phenomenon with good performance in terms of convergence speed and steady-state error. Evaluation results on a three-phase PMSM are presented to validate the effectiveness of the proposed FTC approach.