Concept of Commutation of Pension

Armed Forces personnel shall be entitled to commute for a lump sum payment upto 50% of their pension. It is well known that after introduction of 6^th CC, effective from 01 Jan 2006, 50% of last reckonable emolument is your basic pension.  Armed Forces personnel is entitled to get 50% commuted value of pension but in civil side, only 40% pension can be commuted.  

Formula of Commutation Calculation

50% of Basic Pension x 12 x Purchase Value corresponding to age on the next birthday (as per Commutation Table).

Illustration of Commutaion Calculation

Basic Pension – Rs 24447/-
Age at the time of retirement – 44 years
 [24447 x 12 x 9.019(Purchase Value for 44 years of age)] = Rs. 26,45,904/-

Commuted value of pension is calculated on the basis of the age of the individual on next birthday, which fall after the date on which the commutation becomes absolute. New table wef 2.9.2008 is as under :-

As per extended rules, the commuted portion of pension is restoed after 15 years from date of award of pension/commutated value of pension. However several court cases have been filed in different tribunals and HCs to reue the deducction period as based on rate of interest, the recoverable amount should not be more than 11 years. AFT has also passed such order whih is given here –

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