Commuted Pension Calculator
Updated November 2026 · Free · No sign-up
Calculate commuted pension — central government pensioners may convert up to 40% of basic pension into a lump sum: lump = commuted portion × 12 × the age-based commutation factor (~8.194 at 61), with full pension restoring after 15 years.
Quick answer: Commutation: lump sum = (pension × % commuted) × 12 × commutation factor (8.194 at age 61 on the current table). ₹50,000 pension, 40% commuted: 20,000 × 12 × 8.194 = ₹19.67 lakh tax-free, pension drops to ₹30,000 (+DA on the FULL 50,000) for 15 years, then restores.
How Commutation Works
| Maximum | 40% of basic pension (central rules; states similar) |
| Formula | Commuted amount × 12 × age factor (CCS Commutation Table — 8.194 at age-next-birthday 61) |
| Tax | Government pensioners’ commuted value: fully exempt (private pensions: 1/3-1/2 exemptions) |
| DA protection | Dearness relief continues on the FULL original pension — only the basic reduces |
| Restoration | Full pension restores after 15 years from the commutation date (reduction-period litigation to shorten it to ~11-12 years has been ongoing — track it) |
| Medical exam | Not needed within a year of retirement; needed after |
Worked Example
₹50,000 pension, 40%, age 61: lump ₹19,66,560 tax-free; pension ₹30,000 + DR on 50,000. Over 15 years you forgo 20,000 × 180 = ₹36 lakh of (pre-DR) pension for the ₹19.7L today — an implied ~7-8% discount rate. Financially it’s roughly break-even against safe returns; liquidity needs, health, and family circumstances decide. Not financial advice.
The 8th CPC Angle
Pension revisions at pay commissions recompute on the revised pension — commutation taken NOW is on current basic; post-revision commutation of the enhancement is permitted on the differential. With the 8th CPC implementation approaching, timing questions (commute before or after revision) deserve a pension-office consultation.
Process
Apply via Form 1A with the PPO flow (within one year: no medical); the reduced pension starts from the lump-sum payment/credit date; restoration is automatic at 15 years (keep the commutation date documented — banks mis-set it regularly, and restoration delays are the most common pensioner grievance on CPENGRAMS).
Frequently Asked Questions
How much pension can be commuted?
Up to 40% of basic pension for central government pensioners — lump sum = commuted amount × 12 × the age factor (8.194 at 61).
Is the commuted value taxable?
Not for government pensioners — fully exempt; private-sector commutations get partial (1/3 or 1/2) exemptions.
Does DA reduce after commutation?
No — dearness relief keeps computing on the FULL original pension; only the basic payout reduces for the 15 years.
When does full pension restore?
Fifteen years from the commutation date — automatically; litigation to shorten the period continues, and banks’ restoration-date errors are worth auditing.
Should I commute?
It’s roughly an actuarially neutral trade at safe-return rates — liquidity needs, health, age, and the 8th CPC revision timing drive the real decision; consult the pension office. Not financial advice.
✓ Formula verified • Last updated: November 3, 2026