Real-time monitoring of the condition of equipment enhances effective decision-making in terms of machine maintenance and operational efficiency. This study presents a multi-layered system architecture to monitor the real-time health of a sensor-integrated hand-tool. The architecture is designed based on specific components, features, and requirements of each layer. The study discusses the flow of information in the system and addresses compatibility issues. The selection of required hardware and software was made based on the applicability and compatibility of various available alternatives. The selected modules were a sensor unit, an open-source IoT Platform, and a Wi-Fi Module. A prototype of the sensing unit was developed and was integrated with the tool for conducting the experiments to acquire the vibration data. The experimental setup was designed, and the free-run mode and drilling-mode acceleration data were generated. The obtained real-time acceleration plots indicate that the overall IoT system performed as intended. The quality of the data was verified using the Western Electric rules. The study extends the framework to a warning system using a freeware web-service, which operates sequentially. Upon arriving at the threshold value of acceleration, the web-service automatically sends a warning message to the maintenance team for on-time maintenance.