Commutation of Pension: Formula, Commutation Table, Restoration After 15 Years and Calculator Examples (2026)

Commutation is one of the biggest one-time decisions at retirement. You give up part of your monthly pension for 15 years in exchange for a tax-free lump sum today. This guide explains the 40% limit, the exact formula, the official commutation table, how restoration works, the 12-year demand and its legal status, and several worked examples. For your full pension picture, including DR and 8th CPC scenarios, use our 8th CPC pension calculator.

Who this applies to: the CCS (Commutation of Pension) Rules, 1981 apply to pensioners under the old pension scheme, that is, Government servants appointed on or before 31 December 2003 (Rule 2). NPS and UPS have their own lump-sum rules. See our UPS guide.

Commutation rules at a glance

Item	Rule	Status
Maximum you can commute	40% of pension	Confirmed Rule 5(1)
Formula	Commuted pension × 12 × commutation factor (age next birthday)	Confirmed Rule 8 and Table
Table in force	Commutation values effective from 1.1.2006 (8% interest, LIC 94-96 tables), used for commutations that become absolute from 2 September 2008	Confirmed Table to the Rules
Factor at retirement age 60	8.194 (age next birthday 61)	Confirmed DoPPW FAQ 11.12
No medical examination	If you apply within one year of retirement (Form 1, or Form 1-A before retirement)	Confirmed Rules 12–13
Restoration	On completion of 15 years from the date the reduction in pension becomes operative	Confirmed Rule 10A
DR	Paid on the original basic pension before commutation	Confirmed DoPPW FAQ 12.2
Income tax	Commuted value is fully exempt (per DoPPW)	Confirmed DoPPW FAQ 10.2
12-year restoration	Demanded by staff side; not accepted; 15 years upheld by Delhi HC on 29.05.2026	Proposed

Sources: CCS (Commutation of Pension) Rules, 1981, as amended up to 06.06.2013 (DoPPW); DoPPW FAQs (Central Civil Pensioners).

The 40% limit

Under Rule 5(1), a Government servant may commute up to 40% of their pension for a lump sum. In the application you state a percentage, not a rupee amount. You can choose 40% or any lower percentage. If the percentage gives a fraction of a rupee, the fraction is ignored (Rule 5(3)) Confirmed.

Key points from the Rules and DoPPW’s FAQs Confirmed:

• One chance only. Once your commutation becomes absolute, you cannot commute more later. For example, if you commuted 20%, you cannot top up to 40% (FAQ 11.13).
• Pending proceedings block commutation. If departmental or judicial proceedings under the pension rules are pending, you cannot commute until they end (Rule 4).
• The family cannot commute. If a pensioner dies before the commutation becomes absolute, the family does not get the commutation benefit (FAQ 11.3).
• Apply in time to avoid a medical. Commutation without medical examination is available if Form 1 reaches the Head of Office within one year of retirement. You can also submit Form 1-A at least three months before superannuation so that the lump sum is paid with the PPO (Rule 13). After one year, you need Form 2 and a medical examination (Rule 18).

The commutation formula

Commuted value = (commutation % × basic pension) × 12 × commutation factor

At the maximum, this becomes 40% × basic pension × 12 × commutation factor. The factor is read from the official table against your age on your next birthday, counted from the date the commutation becomes absolute (Rule 8). For a Form 1-A applicant retiring on superannuation, the commutation becomes absolute on the day after retirement (Rule 6(1)(i-a)). DoPPW confirms that someone retiring at 60 takes the age-61 factor of 8.194 Confirmed (FAQ 11.12).

Your monthly pension is reduced by the commuted amount. This is the “residuary” pension. The reduction starts from the date the lump sum is credited, or from the start of pension if it is paid with the PPO (Rule 6). DR keeps being paid on the full original basic pension Confirmed (FAQ 12.2). Check the current rate on our DA/DR hike tracker.

Official commutation table (age next birthday)

Commutation values for a pension of Re. 1 per annum, effective from 1 January 2006, as appended to the CCS (Commutation of Pension) Rules, 1981. Basis: LIC (94-96) Ultimate Tables and 8.00% interest Confirmed. Reproduced exactly from the DoPPW rules document (Table, page 36). Also available on the Pensioners’ Portal.

Age next birthday	Commutation value (years’ purchase)	Age next birthday	Commutation value	Age next birthday	Commutation value
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

Note in the Rules: this table applies to all commutations that become absolute from 2 September 2008. For commutations that became absolute between 1 January 2006 and 1 September 2008, the pre-revised table applies to the pre-revised pension, and this table applies to the extra amount that became commutable after the 6th CPC revision. The older table (effective 1 March 1971, 4.75% interest, factor 9.81 at age 61) is Table 1 on the Pensioners’ Portal and is no longer used for new commutations. Confirmed

Restoration after 15 years

Rule 10A says: “The commuted amount of pension shall be restored on completion of fifteen years from the date the reduction of pension on account of commutation becomes operative in accordance with rule 6.” If commutation was paid in more than one instalment (for example, after a retrospective pension revision), each part is restored 15 years after its own date Confirmed.

• If the lump sum is paid in the first month of retirement and the first pension is already reduced, the 15 years count from the date of retirement. Otherwise they count from the date the reduction took effect Confirmed (DoPPW FAQ 11.5).
• The bank restores the pension automatically; no separate authorisation from the PAO or CPAO is needed (FAQ 11.6). Still, check your PPO for the restoration date.
• The 15-year rule comes from the Supreme Court’s judgment in Common Cause v. Union of India (9 December 1986). DoPPW implemented it through OM No. 34/2/86-P&PW dated 5 March 1987, with restoration from 1 April 1985 Confirmed (DoPPW FAQ 11.7; the OM is listed on doptcirculars.nic.in).

The 12-year restoration demand: where it stands

What is being asked. The Staff Side of the National Council (JCM) asked for restoration after 12 years at the Standing Committee meeting of 22 September 2022. In Parliament, the Government said the matter had been referred to the Department of Expenditure on 3 October 2022 Confirmed (Lok Sabha Unstarred Q. 2317, 21.12.2022). Unions have since put the demand to the 8th CPC, and some ask for 11 years Proposed Reported (Economic Times on AITUC’s 8th CPC demands).

What the courts have said. On 29 May 2026, a Division Bench of the Delhi High Court (W.P.(C) 12781/2024 and connected matters, Union of India v. Sub Trilok Chand (Retd)) dismissed a batch of pensioners’ petitions challenging Rule 10A. It held that the uniform 15-year period is “a conscious policy determination founded upon actuarial evaluation” and upheld it. The Court noted that the 5th CPC’s suggestion of 12 years was not accepted by the Government, and that the 6th and 7th CPCs recommended no change. Where recovery had been stayed during the litigation, it directed that the deferred amount be recovered by extending the period, not in a lump sum Confirmed (Delhi HC judgment PDF).

Bottom line: restoration is 15 years today. A shorter period would need a Government decision, possibly after the 8th CPC reports. Follow developments on our 8th CPC timeline. Confirmed

Worked examples

All examples use the official table. Figures are our calculations Estimate.

Example 1: Retiring at 60, basic pension ₹40,000, commuting 40%

• Commuted pension: 40% × ₹40,000 = ₹16,000 a month
• Lump sum: ₹16,000 × 12 × 8.194 = ₹15,73,248
• Residuary basic pension: ₹24,000. DR at 60% is still paid on ₹40,000 (₹24,000), so the monthly amount is about ₹48,000 instead of ₹64,000.
• After 15 years, the basic pension goes back to ₹40,000.

Example 2: Minimum pension ₹9,000, retiring at 60

• Commuted pension: 40% × ₹9,000 = ₹3,600
• Lump sum: ₹3,600 × 12 × 8.194 = ₹3,53,980.80 (about ₹3.54 lakh)
• Residuary basic pension: ₹5,400, plus DR of ₹5,400 on the full ₹9,000

Example 3: Voluntary retirement at 55, basic pension ₹30,000

• Age next birthday: 56, so the factor is 8.572
• Commuted pension: 40% × ₹30,000 = ₹12,000
• Lump sum: ₹12,000 × 12 × 8.572 = ₹12,34,368

Example 4: Commuting 25% instead of 40% (₹40,000 pension, age 60)

• Commuted pension: ₹10,000. Lump sum: ₹10,000 × 12 × 8.194 = ₹9,83,280
• Residuary basic pension: ₹30,000 instead of ₹24,000

Is it worth it? A simple check

In Example 1, you receive ₹15,73,248 now and give up ₹16,000 a month for 15 years, which is ₹28,80,000 in total. The gap reflects the 8% interest and mortality assumptions built into the table, and the fact that the Government bears the risk if the pensioner dies early. Commutation suits you if you have a clear use for the lump sum, such as clearing a loan or a family need, or if you can invest it safely. If steady monthly income matters more, commuting less than 40% is an option. Estimate

Commutation and the 8th Pay Commission

The 8th CPC was constituted on 3 November 2025 and is expected to report around May 2027. No fitment factor has been announced Confirmed. Two points from past practice are useful:

• Retrospective revision. If your pension is revised upwards retrospectively after you have commuted, Rule 10 says you get the difference in commuted value on the enhanced pension without applying again Confirmed. After the 7th CPC, DoPPW said the age used in the original application applies, with the revised table’s factor (FAQ 11.9). How this applies to the 8th CPC will depend on its implementation orders. Estimate
• Family pension is not affected by commutation. It is based on pay, and the commuted part counts as part of the pension authorised for the enhanced-rate cap. See our family pension guide. Confirmed

Frequently asked questions

What is the commutation factor for retirement at 60?

8.194, the value for age next birthday 61 in the current table (DoPPW FAQ 11.12). Confirmed

How is commuted pension calculated?

Commuted pension per month × 12 × commutation factor. At the 40% maximum, that is 40% × basic pension × 12 × factor. Confirmed

When is commuted pension restored?

On completion of 15 years from the date the reduction in pension became operative (Rule 10A). The bank restores it automatically. Confirmed

Has restoration been reduced to 12 years?

No. It remains a staff-side demand. The Delhi High Court upheld the 15-year rule on 29 May 2026. Proposed

Is DR reduced after commutation?

No. DR is paid on the original basic pension before commutation (DoPPW FAQ 12.2). Confirmed

Is the commuted value taxable?

DoPPW’s FAQ says the commuted value of pension is fully exempt from income tax for these pensioners. Confirm your own case with a tax adviser. Confirmed

Can I commute more later if I commuted less at retirement?

No. There is no second option once the first commutation becomes absolute (FAQ 11.13). The only exception is the extra amount that becomes commutable after a retrospective revision of pension. Confirmed