Government Benefits

Pension Commutation Calculator

Calculate the tax-free lumpsum payout you receive by surrendering a portion of your monthly basic pension upon retirement.

Retirement Parameters

Pension fixed at retirement (excluding DA).

Determines your commutation factor.

40%

Central Govt employees can commute max 40%.

Payout Summary

Commutation Lumpsum

₹15,73,248

Completely tax-free under Sec 10(10A).

Original Pension₹40,000 /mo
New Reduced Pension₹24,000 /mo

Plus applicable Dearness Allowance (DA).

How Pension Commutation Works

  • What is Commutation? Upon retirement, government and PSU employees have the option to "sell" up to 40% of their monthly pension back to the government in exchange for an immediate, tax-free lumpsum payment.
  • The Restoration Rule: If you commute a portion of your pension, your monthly payout reduces immediately. However, the government will restore your pension to its full original amount after exactly 15 years.
  • Dearness Allowance (DA): Even if you commute 40% of your pension, your Dearness Allowance (DA) is always calculated on the original, full basic pension, not the reduced one. This protects you against inflation.
  • The Risk Factor: By taking the lumpsum today, you are betting that you can invest this money to earn returns higher than the effective interest rate of the pension you surrendered. If you spend the lumpsum on liabilities (like a child's wedding), your monthly cash flow is permanently crippled for the next 15 years.