Formula used
A central government pensioner may commute up to forty per cent of basic pension in exchange for a lump sum. The lump sum is the monthly pension being given up, multiplied by twelve, multiplied by a commutation factor taken from the table in the CCS (Commutation of Pension) Rules and read against age next birthday. The commuted portion is deducted from basic pension for fifteen years and then restored automatically without any application. One feature is widely misunderstood and materially changes the arithmetic: dearness relief continues to be calculated on the full basic pension, not on the reduced figure, so commuting does not shrink the relief component. Because the lump sum divided by the monthly reduction equals twelve times the factor, the break-even point in years is simply the commutation factor itself.
Example calculation
A pensioner with basic pension of Rs 50,000 commutes the full forty per cent, giving up Rs 20,000 a month. At a commutation factor of 8.194 the lump sum is Rs 20,000 multiplied by twelve multiplied by 8.194, which is Rs 19.67 lakh. Basic pension falls to Rs 30,000, but dearness relief at sixty per cent is still calculated on the original Rs 50,000, so it remains Rs 30,000 and the monthly figure becomes Rs 60,000 rather than the Rs 48,000 a naive calculation would give. The lump sum is matched by the reductions after roughly 8.2 years, and the commuted portion returns after fifteen.
How to use this calculator
- Enter your basic pension before dearness relief and before any commutation.
- Choose the share you want to commute, up to the forty per cent maximum.
- Look up the commutation factor for your age next birthday and enter it.
- Enter the dearness relief rate applicable to your pension.
- Compare the lump sum against the pension given up over the fifteen-year restoration period.
- Check the break-even period against your own expectations before deciding.
Important assumptions
- Commutation is capped at forty per cent of basic pension.
- The lump sum is monthly commuted pension multiplied by twelve and by the commutation factor.
- Dearness relief is calculated on the full basic pension, not the reduced pension.
- The commuted portion is restored fifteen years after payment.
- The comparison is in plain cash terms and ignores investment returns and inflation.
Common mistakes to avoid
- Assuming dearness relief falls in line with the reduced pension, which understates the monthly figure.
- Reading the commutation factor against age at retirement rather than age next birthday.
- Comparing the lump sum only against the first year of reduced pension rather than the full fifteen years.
- Forgetting that restoration is automatic and needs no application.
- Ignoring what the lump sum could earn if invested, which the plain cash comparison leaves out.
The break-even is the factor itself
The arithmetic of commutation has a neat property. Because the lump sum is the monthly reduction multiplied by twelve and by the factor, dividing the lump sum by that same monthly reduction gives twelve times the factor in months, which is the factor in years. A factor of 8.194 therefore means the lump sum is matched by the reductions after about 8.2 years, comfortably inside the fifteen-year restoration period. In plain cash terms the pensioner gives up more than they receive, which is why the decision usually turns on what else the money can do rather than on the totals alone.
- Break-even in years equals the commutation factor.
- Restoration always comes at fifteen years.
- So the cash comparison favours not commuting, before investment returns.
Source and methodology
Last reviewed: August 2026
This calculator uses the formula and assumptions described on this page. A central government pensioner may commute up to forty per cent of basic pension in exchange for a lump sum. Values are calculated in-browser from user-entered inputs and are not saved by default. Verify tax, regulatory, lender, scheme or product rules with the relevant official source where applicable.
Calculation version: commutation-2026.1 · Facts checked: 2026-08-25
Next review trigger: Any amendment to the CCS (Commutation of Pension) Rules, the commutation table, or the restoration period.
Educational estimate only. RupeeKit does not provide personalized financial, investment, legal, tax or loan advice.
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You can cross-check this estimate using: salary in-hand calculator, Old vs New Tax Regime Calculator, 80C deduction calculator, EMI calculator, ITR-2 filing guide, emergency fund guide.
When this tool is useful
- When you want a fast estimate before making a financial or salary decision.
- When you want to compare different assumptions in seconds.
- When you want to understand the formula behind the result.