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Commutation


A Defence civilian pensioner who retired on or after 1.1.1996 can commute a fraction not exceeding 40% of his pension. The Defence civilian pensioners who retired before 1.1.1996 could commute a fraction not exceeding one-third of his pension

No Govt. servant who is involved in Departmental or Judicial proceedings, either before or after retirement, can commute a fraction of his pension.
If applicant dies without receiving the commuted value after commutation become absolute, the commuted value is paid to his legal heirs.

Commutation without medical examination:

The pensioners in receipt of following types of pension can commute after 40% of their pension without medical examination, if they apply for commutation before expiry of one year from:
  1. the date of retirement in cases of superannuation, retiring and compensation pension;
  2. the date of issue of Govt. sanction in the case of Pro-rata pension on absorption in PSU/Autonomous bodies and;
  3. the date of issue of final orders in the case of pension granted on finalisation of departmental/judicial proceedings and issue of final orders thereon

Commutation after medical examination:

The following categories of pensioner can commute a portion of their pension after being medically examined and declared fit by the appropriate medical authority:
  1. Retired on invalidation
  2. Retired compulsorily as a measure of penalty
  3. In receipt of compassionate allowance
  4. All pensioners applying for commutation after one year from the date of retirement

When commutation becomes absolute:

The commutation becomes absolute and the commuted value becomes payable on the date.
  1. following the date of retirement in cases where the application for commutation of superannuation pension is received by Head of office on or before the date of superannuation;
  2. of receipt of application for commutation of pension by H.O.O. without medical examination before the expiry of one year period from the date of retirement;
  3. on which the medical authority signs the medical report for commutation
  4. on which the first medical authority recorded its opinion when its decision is set aside or modified on appeal.

Model Calculation: Commutation

The lump sum amount of commuted value of pension is calculated with reference to purchase value for the each next birthday as laid down in the Table of values prescribed from time to time and applicable to the applicant on the date commutation become absolute. The commutation table as prescribed by the Govt. w.e.f. 1.3.1971 is still operative.
Formula for working out Commuted Value of pension = Amount of pension to be commuted X 12 X purchase value for age next birth day .
Post Class - II
Date of Birth 15.04.1951
Date of Appointment 26.12.1973
Date of Retirement 30.04.2011
Qualifying Service 37 years 4 months 5 days
Pension Rs. 5843/-
Portion of Pension to be Commuted: 40% i.e. 40% of 5843 2337.20
Portion to be commuted after ignoring the fraction Rs.2337/-
Age next birthday i.e. on 15.04.2012 61 years
Purchase value 8.194 (as per new Commutation Table)
Amount of commutation 2337 X 12 X 8.194
229792.54 Say Rs. 229793/-
Commuted value of Pension Rs. 229793/- payable on or after 01.05.2011

Date from which reduction in the amount of pension after commutation:

  1. In case of an applicant who draw pension from Treasury/DDPO from the date of receipt of the commuted value of pension or at the end of three months from the date of issue of PPO whichever is earlier.
  2. In case an applicant who draws pension from branch of Public Sector Bank, the reduction in amount of pension on account of pension commuted shall be operative from the date on which the commuted value of pension is credited by the bank to the applicant’s account to which pension is credited.
  3. In case where individual applies for commutation of pension before the date of his retirement, the commuted value becomes payable on the day following the date of retirement and the reduction in the amount of pension on account of commutation shall be operative from its inception.

Restoration of commuted amount of pension

The commuted amount of pension is restored after 15 years from the date of commutation or the date from which reduction in pension was made by the PDA.
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