Work out your commutation
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How commutation works
Commuted portion = Basic pension × portion% (maximum 40%)Lump sum = Commuted portion × 12 × commutation factorPension after commutation = (Basic pension − commuted portion) + DR on full basic pensionBasic pension ₹61,070 → commuted portion ₹24,428
Lump sum = 24,428 × 12 × 8.194 = ₹24,01,956
Monthly pension afterwards = ₹73,284
DR is not reduced
This is the part that surprises people. Commutation reduces your basic pension, but dearness relief keeps being paid on the full basic pension. So the monthly drop is smaller than the commuted percentage suggests, and it shrinks further every time DR rises.
Restoration after fifteen years
The commuted portion is restored fifteen years after commutation, and full basic pension resumes from then. Whether commuting is worth it depends on what you do with the lump sum and how long you expect to draw the reduced pension.
Common questions
What is pension commutation?
Commutation lets you take part of your monthly pension as a one-time lump sum at retirement. Your monthly pension is reduced by the portion you commute, and that reduction stays in place until the commuted portion is restored.
How much of my pension can I commute?
Up to 40% of your basic pension. You cannot commute more than that, and you cannot commute dearness relief at all — DR keeps being paid on your full basic pension even after commutation.
How is the commutation lump sum calculated?
The commuted portion of monthly pension is multiplied by twelve and then by the commutation factor for your age at the next birthday. The factor falls as age rises, so commuting later gives a smaller lump sum for the same portion.
What is the commutation factor?
The factor is taken from the government's commutation table by age. At age 60 it is 8.194 and at 61 it is 8.051. Later ages carry progressively lower factors.
When is the commuted pension restored?
The commuted portion is restored after fifteen years from the date of commutation, after which the full basic pension resumes. Dearness relief continues on the full basic pension throughout.
Is the commuted lump sum taxable?
Commuted pension received by a government employee is exempt from income tax. The reduced monthly pension you continue to draw remains taxable as salary income.
Official sources
Rules and rates on this page come from the departments below. Where a figure matters to you, check it against the current order — RailStaff is not the authority for it.
- Department of Pension & Pensioners' Welfare — commutation table, limits and restoration
- Ministry of Railways (Railway Board) — application on the railways
- Income Tax Department — tax treatment of commuted pension
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