Pension Commutation Calculator & Commutation Factor Table

Commutation of Pension Formula — How to Calculate Commuted Value

Commutation is the capitalisation of a fraction of your monthly pension: you surrender part of your pension for fifteen years and receive its present value now, as a single tax-free payment. The commutation formula is fixed by rule and there is no discretion in it.

How to calculate commutation of pension in four steps

1. Take your basic pension from the PPO — not the bank credit, which includes DR. Example: a Level 10 officer retiring on ₹56,100 basic pay has a basic pension of ₹28,050.
2. Decide the percentage to commute, up to 40%. At 40%, the pension offered is ₹28,050 × 40% = ₹11,220 a month.
3. Pick the commutation factor for your age on next birthday. Retiring at 60 → next birthday 61 → factor 8.194. Taking VRS at 55 → 56 → 8.572.
4. Multiply: ₹11,220 × 12 × 8.194 = ₹11,03,240. Basic pension falls to ₹16,830 for fifteen years; DR of ₹16,830 (60% of the full ₹28,050) continues, so the monthly credit is ₹33,660 instead of ₹44,880.

Commutation Factor Table 2026 for Central Government Employees (Age 20 to 81)

This is the latest commutation factor table in force in 2026 — the commutation values notified under the CCS (Commutation of Pension) Rules 1981 for commutations that became absolute on or after 2 September 2008. The values are derived from the LIC (94–96) Ultimate Mortality Tables at an interest rate of 8% per annum, and are expressed as the number of years' purchase. The age column is age on next birthday, not age at retirement.

Commutation factor by age at retirement — quick reference

• Retiring at 60 (superannuation): age next birthday 61 → factor 8.194
• Retiring at 59: 60 → 8.287  ·  at 58: 59 → 8.371  ·  at 57: 58 → 8.446
• VRS at 55: 56 → 8.572  ·  VRS at 53: 54 → 8.678  ·  VRS at 50: 51 → 8.808
• Defence retiring at 35–45: factors between 9.145 (36) and 8.971 (46)
• Commuting late at 62, 64, 66: 63 → 7.982, 65 → 7.731, 67 → 7.431 (medical examination required after one year)

The "Age Next Birthday" Rule

The factor is not read against your age at retirement. Rule 8 requires it to be taken against your age on the next birthday following the date on which commutation becomes absolute — normally the day after you retire.

For an employee retiring on superannuation at 60, the next birthday is the 61st, so the applicable factor is 8.194, not the 8.287 listed against age 60. Applying 8.287 would overstate the lump sum; applying 7.731 (age 65) would understate it substantially.

The Rules in Brief

• Maximum 40% of basic pension may be commuted by central government civil pensioners. Fractions are ignored.
• No medical examination if you apply within one year of retirement, using Form 1. Apply later and a medical examination becomes mandatory, the process lengthens, and the standards are stricter.
• One opportunity only. There is no provision to commute a further slice later. If you commute 20% at retirement, you cannot come back for the remaining 20%.
• Family pension cannot be commuted under any circumstances.
• Pending proceedings bar commutation. A government servant against whom departmental or judicial proceedings are pending is not eligible until they conclude.
• Restoration is automatic after fifteen years from the date the commuted value was credited. The bank restores it without any application; where the date is missing from the PPO the bank obtains it from the PAO through CPAO.
• Paid in stages, restored in stages. If the commuted value was released in instalments, restoration follows the respective dates of payment.
• Later pension revision entitles you to more. Under Rule 10A, if your pension is revised upward after commutation, you receive the difference on the additional commutable amount.
• Applies to pre-2004 entrants. These rules cover government servants appointed on or before 31 December 2003. NPS subscribers are outside them.

Restoration of Commuted Pension After 15 Years — Restoration Date Calculator

The commuted portion of your pension is restored in full on completing fifteen years from the date the commuted value was paid. Enter that date in the calculator above and it returns your exact restoration date; the examples below show how it works.

• Automatic, no application. The pension disbursing bank restores the commuted portion on its own; where the commutation date is missing from the PPO, the bank obtains it from the PAO through CPAO.
• What gets restored: the basic pension returns to the full original figure (as revised by any pay commission in the meantime). DR, which was always paid on the full figure, does not change.
• Missed restoration: if your bank has not restored a commutation that fell due, write to the branch with your PPO number; arrears are payable from the due date.
• Death before restoration: nothing is recovered from the family, and family pension starts on the full last pay, unreduced by commutation.

Should You Commute? Break-Even Maths and the Implicit Interest Rate

Strip away the complexity and the trade is simple. You receive a lump sum equal to roughly 8.2 years' worth of the pension you give up, and you give it up for 15 years. The break-even period is therefore approximately the commutation factor itself.

Is there an interest rate on commutation of pension?

No interest is charged, because commutation is not a loan — but the factor table is constructed on an assumed 8% per annum interest basis, so there is an implicit cost. Searching for a "commutation loan calculator" misses the point: with a loan you repay principal plus interest and keep your full pension; with commutation you receive about 8.2 years of pension and surrender it for 15, which pensioner bodies work out as an effective charge of roughly 8% a year on the lump sum. Compare that with what you would pay on a personal loan (typically 10–14%) or earn on a safe deposit (around 7%) before deciding — and remember the commuted value is tax-free while loan interest is not deductible.

Arguments for commuting

• The lump sum is entirely tax-free for government employees under section 10(10A) — an unusual and valuable feature.
• Immediate liquidity at exactly the point in life when large one-time needs cluster: clearing a home loan, a child's education or marriage, medical costs, or building a home.
• Dearness Relief is unaffected, so the reduction in your monthly credit is smaller than the headline percentage and shrinks further as DR rises.
• Clearing high-interest debt with a tax-free lump sum usually beats any return you could earn on it.

Arguments against commuting

• You pay for roughly 15 years to buy back about 8.2, so on pure arithmetic the government comes out ahead unless you deploy the money productively.
• Your monthly income falls for fifteen years at the stage of life when medical costs typically rise.
• The factor table dates from 2008 and assumes 8% interest — a rate few safe instruments now offer, which weakens the case for taking the money out to invest it.
• It is irreversible. There is no second bite and no early restoration.

Commuted Value of Pension Table by Pension Slab (Age 60, Factor 8.194)

A 40% pension commutation ready reckoner for retirement at 60 — find the row nearest your basic pension, or enter your exact figure in the calculator above for 20%, 30% or 40%.

Commutation Table for Defence, Bank and State Government Employees

Defence pensioners

Armed forces pensioners may commute up to 50% of pension, against 40% for civil pensioners. Commutations on or after 2 September 2008 use the same revised table of commutation values. Because defence personnel typically retire much earlier than 60, the applicable factor is higher — an officer with age next birthday 56 uses 8.572 — which produces a larger lump sum per rupee of pension surrendered.

Bank employees

Employees retiring under the Bank Employees' Pension Regulations 1995 may commute a maximum of one third of basic pension, and the applicable table is different from the CCS one — its values run far higher, from 19.26 at age 17 down to 3.13 at 85, because it is constructed on a different interest basis. Restoration is likewise after fifteen years. Do not apply the CCS table to a bank pension.

Commutation table for state government employees

Most states follow the central architecture, and many — Uttar Pradesh among them — have adopted the central limit of 40% and the same 2008 commutation factor table, so the calculator above can be used directly by setting the DR rate to your state's figure. Where states differ it is usually in one of three ways:

• Commutable fraction: some states still cap commutation at one third of pension rather than 40%.
• Factor table: a few states retain an older table with different values, or apply the central table from a different effective date.
• Restoration period: fifteen years is near-universal, but a handful of states have discussed twelve.

Treat the figures on this page as indicative for a state pension and confirm the commutable fraction, factor table and restoration period in your state's commutation of pension rules or the relevant Government Order before filing your application.

Commutation of Pension Calculation — Frequently Asked Questions

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