Pension Commutation Calculator
Pension Commutation Calculator
The lump sum a Central Government pensioner gets for commuting up to 40% of the basic pension, from the official commutation table, the reduced pension, and what the trade costs until the full pension is restored after 15 years.
Commuted value of pension
Basic pension $40,000, commuting 40%, retiring at 60 (age next birthday 61, factor 8.194)
Commuted value of pension (CCS (Commutation of Pension) Rules, 1981)
- c
- the part of the monthly basic pension commuted, at most 40%
- F
- the commutation value for age next birthday from the table (years’ purchase of ₹1 a year of pension)
- implied interest
- the annual rate i at which 180 monthly payments of c are worth the lump sum today: c × [1 − (1 + i/12)⁻¹⁸⁰] ÷ (i/12) = lump sum, i effective, solved by bisection
Worked example
Basic pension $40,000, commuting 40%, retiring at 60 (age next birthday 61, factor 8.194)
Pension commuted: 40% of 40,000 = $16,000 a month
Lump sum = 16,000 × 12 × 8.194 = $15,73,248
Basic pension paid for the next 15 years: $24,000; dearness relief still on $40,000
Given up over 15 years: 16,000 × 180 = $28,80,000 — an implied rate of about 9.43% a year
Commutation values for a pension of ₹1 a year (ages next birthday 20–81)
| Age next birthday | Factor | Age next birthday | Factor | Age next birthday | Factor |
|---|---|---|---|---|---|
| 20 | 9.188 | 41 | 9.075 | 62 | 8.093 |
| 21 | 9.187 | 42 | 9.059 | 63 | 7.982 |
| 22 | 9.186 | 43 | 9.040 | 64 | 7.862 |
| 23 | 9.185 | 44 | 9.019 | 65 | 7.731 |
| 24 | 9.184 | 45 | 8.996 | 66 | 7.591 |
| 25 | 9.183 | 46 | 8.971 | 67 | 7.431 |
| 26 | 9.182 | 47 | 8.943 | 68 | 7.262 |
| 27 | 9.180 | 48 | 8.913 | 69 | 7.083 |
| 28 | 9.178 | 49 | 8.881 | 70 | 6.897 |
| 29 | 9.176 | 50 | 8.846 | 71 | 6.703 |
| 30 | 9.173 | 51 | 8.808 | 72 | 6.502 |
| 31 | 9.169 | 52 | 8.768 | 73 | 6.296 |
| 32 | 9.164 | 53 | 8.724 | 74 | 6.085 |
| 33 | 9.159 | 54 | 8.678 | 75 | 5.872 |
| 34 | 9.152 | 55 | 8.627 | 76 | 5.657 |
| 35 | 9.145 | 56 | 8.572 | 77 | 5.443 |
| 36 | 9.136 | 57 | 8.512 | 78 | 5.229 |
| 37 | 9.126 | 58 | 8.446 | 79 | 5.018 |
| 38 | 9.116 | 59 | 8.371 | 80 | 4.812 |
| 39 | 9.103 | 60 | 8.287 | 81 | 4.611 |
| 40 | 9.090 | 61 | 8.194 | — | — |
40% of a 40,000 basic pension, by age at retirement
| Age next birthday | Factor | Lump sum |
|---|---|---|
| 58 | 8.446 | $16,21,632 |
| 60 | 8.287 | $15,91,104 |
| 61 | 8.194 | $15,73,248 |
| 62 | 8.093 | $15,53,856 |
| 66 | 7.591 | $14,57,472 |
How commutation of pension works
Commutation lets a Central Government pensioner take part of the pension as a lump sum now. Under rule 5 of the CCS (Commutation of Pension) Rules, 1981 you can commute up to 40% of the basic pension; if the percentage leaves a fraction of a rupee, the fraction is ignored. The lump sum is the commuted pension for a year multiplied by a commutation value — a number of years’ purchase — read from the official table for your age next birthday on the date the commutation becomes absolute. The table in use since 2 September 2008 is built on LIC (94-96) mortality and 8% interest, and runs from age 20 (9.188) to 81 (4.611). Retiring at 60, your age next birthday is 61 and the factor is 8.194: commuting 40% of $40,000 gives $16,000 × 12 × 8.194 = $15,73,248.
From then the basic pension is paid less the commuted part. Under rule 10A the full pension is restored after fifteen years from the date the reduction starts. The restoration period has been challenged — associations have asked for 12 years, and a claim that the Supreme Court had cut it was fact-checked as false — but the rule is still 15 years. Dearness relief continues to be paid on the original basic pension before commutation, so the monthly cut is only the commuted basic.
Is it a good deal? Think of it as a loan. You receive $15,73,248 now and repay $16,000 a month for 180 months, $28,80,000 in all. The rate that makes those equal is about 9.43% a year — the page works it out for your age by bisection. That is the cost if you live the full 15 years; if the pensioner dies sooner, the rest is not recovered, so the loan carries life cover. A lump sum invested safely at more than that rate would come out ahead; below it, keeping the pension pays better. Compare with a deposit rate in the SCSS calculator, and weigh what you need the money for. Commutation also cannot be reversed once absolute.
Commutation within a year of retirement needs no medical examination; later applications, and some cases such as invalid pension, need one. State governments, defence services and banks have their own rules and tables. The commuted value is generally exempt from income tax for government employees, but the Income-tax Act, 2025 took effect on 1 April 2026, so check the current provision. For DR on the full pension see the DA hike calculator; to compare any pension with a lump sum over your lifetime, the pension lump sum vs annuity calculator. This is arithmetic on the figures you enter, not financial advice.
Frequently asked questions
How is commutation of pension calculated?
Pension commuted a month × 12 × the commutation factor for your age next birthday. 40% of $40,000 at age next birthday 61: 16,000 × 12 × 8.194 = $15,73,248.
What is the commutation factor at age 61?
8.194 years’ purchase, from the table used for commutations becoming absolute on or after 2 September 2008. At 60 it is 8.287 and at 62, 8.093.
How much pension can be commuted?
Up to 40% of the basic pension, under rule 5 of the CCS (Commutation of Pension) Rules, 1981.
When is the commuted pension restored?
After 15 years from the date the reduction took effect, under rule 10A. Demands for 12 years have not changed the rule.
Is DR paid on the reduced pension after commutation?
No — DR is paid on the original basic pension before commutation (DoPPW OM of 25 October 2022).
Related calculators
References
- Central Civil Services (Commutation of Pension) Rules, 1981: rule 5 (a Government servant may commute “an amount not exceeding forty percent of his pension”; a fraction of a rupee is ignored); rule 10A (the commuted amount is restored “on completion of fifteen years from the date the reduction of pension on account of commutation becomes operative”); the lump sum is worked out from the table of values in force on the date the commutation becomes absolute, by age next birthday.
- Table of commutation values for a pension of ₹1 a year, based on LIC (94-96) Ultimate Tables and 8.00% interest, used for commutations becoming absolute on or after 2 September 2008 (6th CPC revision, effective 1 January 2006); ages next birthday 20 to 81. As printed in Schedule B of the All India Services (Commutation of Pension) Regulations, 1959 (Ministry of Home Affairs revision, 11 July 2024), which carries the same table.
- Department of Pension & Pensioners’ Welfare. OM No. 42/15/2022-P&PW(D)/1, 25 October 2022: dearness relief “is payable on the original basic pension before commutation”.
- Factly. “The Supreme Court of India did not reduce the pension commutation recovery period” (fact check): the 15-year restoration in rule 10A is unchanged.
- Brealey RA, Myers SC, Allen F. Principles of Corporate Finance. McGraw-Hill. Present value of an annuity and of a growing annuity; the internal rate of return.