Commuted Pension Calculator — Lump Sum & Reduced Pension

What is Commutation of Pension?

Commutation of pension allows Central Government employees to surrender up to 40% of their basic pension in exchange for a tax-free lump sum at the time of retirement. The lump sum is calculated using the formula: Monthly Pension to Commute × 12 × Commutation Factor, where the commutation factor depends on the employee's age at retirement (next birthday).

The commuted portion of pension is restored after 15 years from the date of retirement, returning the pensioner to their full original pension. During the 15-year period, Dearness Relief (DR) continues to be calculated on the reduced pension amount. The lump sum is fully exempt from income tax under Section 10(10A)(i). Use the Defence Pension Calculator for military-specific pension calculations.

Commutation Factor Table (Ages 20–65)

Source: CCS (Commutation of Pension) Rules, 1981. Factor based on age at next birthday after retirement.

Should You Commute Your Pension?

Commutation Under 8th CPC

The commutation factor table and 40% limit are expected to remain unchanged under the 8th Pay Commission. However, pensions will be significantly higher due to the fitment factor (estimated 1.92×), resulting in larger lump sums. See the 8th CPC Pay Matrix for projected pay values. Don't forget to also calculate your retirement gratuity — another major lump sum benefit.

Commuted Pension — Frequently Asked Questions