Commutation — the lump sum in your hand, and what it costs
Commutation means selling a slice of your monthly pension — up to 50% of it — for a one-time lump sum at retirement. The deduction then runs for 15 years, after which the full pension is restored. The lump sum is worked out by one fixed formula, from a government factor table based on your age.
Most pages stop there. Here is the part they skip: over those 15 years you give up 180 months of the commuted portion, and the lump sum you received was worth roughly 103–110 months of it. Commutation is a loan against your own pension — sometimes exactly the right loan (land, a house, a daughter's wedding, a debt with worse interest), but a loan. This page shows both sides of the trade.
Calculator
Whatever you type stays in this browser — it is not sent to any server and not recorded anywhere. Details in Privacy. The factors come from rates.json — that file is public on purpose, so anyone can check what this site calculates with.
How the figure is built
- Choose the slice — any part of the basic pension up to 50%. The deduction will equal this slice, every month, for 15 years.
- Find your factor — by the age on your next birthday, from the government table (a selection below; the calculator has every age from 20 to 81).
- Multiply — portion × 12 × factor, rounded up to the next rupee. That is the one-time payment. (If the portion itself comes to a fraction of a rupee, the fraction is dropped first — the rules say so.)
- What continues — the reduced basic pension, plus Dearness Relief on the full pension, every month until restoration.
A worked example
A Havildar's pension is ₹15,100; he retires at 41, so the age on his next birthday is 42 — factor 9.059. He commutes the full 50%: ₹7,550. Lump sum = 7,550 × 12 × 9.059 = ₹8,20,746, one time. For the next 15 years he draws ₹7,550 basic + ₹9,060 Dearness Relief (60% of the full ₹15,100) = ₹16,610 a month. The other side of the trade: 180 months × ₹7,550 = ₹13,59,000 forgone against ₹8,20,746 received.
The factor table — a selection
| Age next birthday | Factor |
|---|---|
| 36 | 9.136 |
| 38 | 9.116 |
| 40 | 9.090 |
| 42 | 9.059 |
| 44 | 9.019 |
| 46 | 8.971 |
| 48 | 8.913 |
| 50 | 8.846 |
| 52 | 8.768 |
| 54 | 8.678 |
| 56 | 8.572 |
| 58 | 8.446 |
| 60 | 8.287 |
⚠ What this calculator does not cover Commutation of the disability element has its own rules, and pension revisions (OROP, pay commissions) change the arithmetic of an already running commutation in their own way — neither is calculated here. Applying more than one year after retirement needs a medical examination, and the factor moves to your age at that time.
Frequently asked questions
Is commutation worth it?
It is a trade, not a gift: roughly 103–110 months' worth of the slice upfront, against 180 months of deduction. If the lump sum goes into something that matters more than the monthly difference — land, a roof, clearing costlier debt — it can be exactly right. Taken just because it is offered, it is expensive. Decide with the full figure in front of you; that is what this page is for.
Does my Dearness Relief reduce after commutation?
No. Dearness Relief continues on the full pension — the deduction applies only to the basic pension. Many pensioners are wrongly told otherwise, and it changes the arithmetic considerably.
When does the full pension come back?
Fifteen years from the date the deduction takes effect. If it does not happen on its own, apply to your pension disbursing office — on SPARSH it is raised as a service request.
Is the lump sum taxed?
No — for government pensioners, including defence, the commuted value of pension is exempt from income tax under Section 10(10A)(i) of the Income-tax Act, 1961. For anything unusual in your own case, a tax adviser is still the right door.
Do I need a medical examination?
Not if you apply within one year of retirement. After one year, the application goes through your pension disbursing authority and a medical is required — and the factor applied is for your age then, which lowers the lump sum.
Sources
- Pension Regulations for the Army, Part-I (2008, corrected to 2020), commutation chapter — clauses read and matched on 3 August 2026: Regulation 153 (maximum 50% from 1.1.2006; Note 1 — a fraction of a rupee in the commuted portion is ignored), Regulation 158 with Appendix X (portion × 12 × the age factor; the factor table itself, matched digit for digit), Regulation 163 (restoration after 15 years), Regulations 155–156 (no medical board within one year of release; board required after), Regulation 15(a) (the final value rounds up to the next rupee). The authority the Regulations cite: Para 9.1 of MoD letter No. 17(4)/2008(2)/D(Pen/Pol), dated 12 November 2008.
- The same table as published by PCDA (Pensions) — pcdapension.nic.in, "Commutation Table" (effective 2 September 2008, LIC 94-96 Ultimate Tables at 8% interest) — matched against Appendix X.
- Dearness Relief on the full pension after commutation — DoP&PW OM No. 42/15/2022-P&PW(D)/1, dated 25 October 2022: "Dearness relief is payable on the original basic pension before commutation… and not on the pension as reduced after deduction of commuted pension." DR rate 60% — DoP&PW OM No. 42/02/2024-P&PW(D), dated 24 April 2026.
- Income-tax exemption of the commuted value — Section 10(10A)(i) of the Income-tax Act, 1961: payments in commutation of pension under Central Government rules or "any similar scheme applicable to… holders of posts connected with defence" are exempt.
This is general information, not legal or financial advice, and the figure is an estimate, not a sanction — the actual commuted value is fixed by your PPO. Confirm your case with your Record Office or pension disbursing agency. Sainik Desk is a private website with no government affiliation.