Commutation factor table

The commutation factor table is the Table appended to the Central Civil Services (Commutation of Pension) Rules, 1981 that gives, for each age at the next birthday, the number of years’ purchase the Government pays for a commuted slice of monthly pension. The factor is 8.194 at age next birthday 61, and the schedule runs from 9.188 at age 20 to 4.611 at age 81. Under Rule 8 the lump sum is the commuted monthly pension multiplied by the factor and by 12, so a pensioner commuting Rs. 20,000 a month at 8.194 receives Rs. 19,66,560. The Table in force took effect on 2 September 2008 and is built on the LIC (1994-96) Ultimate mortality table at 8% interest.

One number from this Table settles the whole of a commutation decision. The 40% ceiling in Rule 5(1) fixes how much pension may be converted; the factor fixes what the conversion is worth. Everything downstream, the reduced pension, the dearness relief that continues on the full un-commuted figure, the restoration after fifteen years, follows once the lump sum is known, and the lump sum is nothing but the slice multiplied by a figure read off a single row.

The Table is also the most commonly misread document in the pension file. It is keyed on the age a pensioner will attain at the next birthday, not the age attained, so an employee retiring at 60 takes 8.194 rather than the 8.287 printed against age 60. Reading the wrong row overstates the lump sum by Rs. 22,320 on a commuted slice of Rs. 20,000 a month.

This article carries the full Table from age 20 to age 81, the Rule 8 formula and worked examples, the age-next-birthday convention and which date fixes it, the mortality and interest assumptions the factors are built from, what the 2 September 2008 revision changed against the 1971 Table it replaced, the 40% civil and 50% defence ceilings, the tax exemption on the lump sum, the position under the Old Pension Scheme, the Unified Pension Scheme and the National Pension System, and the standing demand for a fresh table. Every figure is cited to the Rules, the governing Office Memorandum, or the Parliament answer.

What the factor is

A commutation factor is a years’ purchase figure: the number of years of the commuted annual pension that the Government pays as a single sum today. It is not an interest rate and not a percentage. A factor of 8.194 means the Government pays 8.194 times the annual value of the slice given up, and because the annual value is twelve times the monthly, the lump sum is the monthly slice multiplied by 8.194 and by 12.

The Table is administrative rather than negotiated. Every pensioner of the same age next birthday takes the same factor, whatever the size of the pension, whatever the pay level held at retirement, and whatever the length of qualifying service. Nothing in the Table varies with sex, with health, or with the ministry the pensioner served in.

That uniformity is what makes commutation arithmetic rather than judgment. Two decisions are left to the pensioner: whether to commute at all, and what fraction of the permitted 40% to commute. Both are decided against a factor that is already fixed by the date on which the commutation becomes absolute.

Factors by age, 20 to 81

The Table effective 2 September 2008 gives the following commutation values, expressed as the number of years’ purchase for a pension of Re. 1 per annum, against the age at the next birthday.

Table appended to the CCS (Commutation of Pension) Rules, 1981, effective 2 September 2008 under Office Memorandum No. 38/37/08-P&PW(A) of that date.

Three features of the schedule are worth naming. It begins at age next birthday 20 and ends at 81, so a pensioner older than 80 at the operative date reads the last row. It is almost flat below 40, moving only 0.098 across the whole twenty years from 9.188 to 9.090, because at those ages the expected remaining life is long enough that a further year makes little difference to the present value. And it steepens after 60: the drop from 61 to 81 is 3.583, more than four times the 0.803 drop from 40 to 60.

The row that matters most is age next birthday 61, at 8.194. A central government employee retiring on superannuation at 60 lands on it, and that single value governs the majority of commutations processed each year.

Age next birthday, not current age

The Table is read against the age a pensioner will attain at the next birthday falling after the date the commutation becomes absolute, not the age attained on that date. An employee who retires on superannuation at 60 has a next birthday of 61, so the applicable factor is 8.194. The 8.287 printed against age 60 belongs to a pensioner whose next birthday is the sixtieth, which means the commutation became absolute between the fifty-ninth and sixtieth birthdays, and in practice that means voluntary retirement rather than superannuation.

The error is worth money. On a commuted slice of Rs. 20,000 a month, reading 8.287 instead of 8.194 gives Rs. 19,88,880 instead of Rs. 19,66,560, an overstatement of Rs. 22,320 that the pay and accounts office will correct at sanction. On the maximum commutable slice of a senior pension the gap is larger in the same proportion, because the lump sum is directly proportional to the slice.

The convention exists because the Table is an actuarial one. A years’ purchase figure is computed for a whole life aged x, and the actuarial convention takes the next integral age rather than rounding the exact age at the valuation date. The commutation of pension calculator applies the rule automatically, so a pensioner who enters an age of 60 is given the 61 row without having to make the adjustment.

The lump-sum formula

Rule 8 of the CCS (Commutation of Pension) Rules, 1981, read with the Table appended to those Rules, fixes the commuted value as:

Lump sum = commuted monthly pension x commutation factor x 12

The 12 converts the monthly slice into an annual figure, and the factor is the number of years’ purchase of that annual amount. The commuted monthly pension is the slice being given up, capped at 40% of basic pension under Rule 5(1), and not the whole pension.

A pensioner on a basic pension of Rs. 50,000 a month who commutes the full 40% gives up Rs. 20,000 a month. At age next birthday 61, factor 8.194, the lump sum is Rs. 20,000 multiplied by 8.194 multiplied by 12, which is Rs. 19,66,560. The basic pension reduces to Rs. 30,000 a month from the date the reduction becomes operative.

A pensioner on the same Rs. 50,000 who commutes half the permitted maximum, Rs. 10,000 a month, receives exactly half the lump sum, Rs. 9,83,280, and keeps Rs. 40,000 a month as the reduced pension. Because both the factor and the 12 are fixed for a given age, the lump sum scales in strict proportion to the slice, and there is no threshold, no slab and no tapering anywhere in the calculation.

Rule 5(3) disposes of the rounding question: a fraction of a rupee in the commuted portion is ignored. The commuted value itself is computed on the rounded slice.

Why the factor falls with age

The factor falls because the Government recovers the lump sum through the reduction in monthly pension, and an older pensioner is expected to live for fewer of the years over which that reduction runs. Paying 8.194 years’ purchase to a 61-year-old and the same 8.194 to an 80-year-old would price two different risks identically. The Table prices them separately, at 8.194 and 4.812.

The rate of fall is not uniform, and the shape carries information. Below 40 the schedule is nearly level, moving 0.098 across twenty years. Between 40 and 60 it falls 0.803. Between 61 and 81 it falls 3.583. Mortality rates rise roughly exponentially with age past middle life, so each additional year removes a progressively larger slice of the expected recovery period, and the years’ purchase falls faster the older the pensioner.

For a pensioner deciding when to commute, the fall sets a price on delay. Commuting Rs. 20,000 a month at age next birthday 61 gives Rs. 19,66,560. The same slice at age next birthday 65, factor 7.731, gives Rs. 18,55,440. Four years of waiting costs Rs. 1,11,120 on that slice, before counting the interest value of having the money earlier, and before counting the medical examination that a late application attracts.

Mortality and interest basis

The Table effective 2 September 2008 is built on the LIC (1994-96) Ultimate mortality table at 8% interest. Department of Pension and Pensioners’ Welfare Office Memorandum No. 38/37/08-P&PW(A) dated 2 September 2008 notified it on the Sixth Central Pay Commission’s recommendation, and it applies to every commutation becoming absolute on or after that date.

The two inputs pull in opposite directions. A longer expected life in the mortality table raises the years’ purchase, because the reduction in pension is expected to run for more years and the Government is buying a longer stream. A higher assumed rate of interest lowers it, because a payment expected in year twelve is discounted more heavily at 8% than at 4.75%. In the 2008 revision the interest change dominated, which is why the factors at working ages fell despite the newer mortality data reflecting longer lives.

Because both inputs are demographic and financial rather than fiscal, the Table does not move when pay moves. The same factors have applied through the whole of the 7th Central Pay Commission period, across three dearness allowance cycles a year and two pension revision exercises, without amendment.

What the 2008 revision changed

The 2 September 2008 revision cut the commutation factor at every age up to 70 and raised it from 71 upward. The Table it replaced took effect on 1 March 1971 and assumed 4.75% interest; the current Table assumes 8%, and the higher discount rate is what moved the figures.

The 1971 Table, at 4.75% interest, against the Table effective 2 September 2008 at 8% interest on the LIC (1994-96) Ultimate mortality basis.

The crossover falls between ages 70 and 71. Below it the discounting effect of the higher interest rate outweighs the longer life expectancy in the newer mortality data, and the factor falls; above it, where the remaining stream is short and discounting bites less, the mortality improvement dominates and the factor rises. At the ages at which central government employees actually retire, 55 to 62, the revision cut the factor by between 1.387 and 3.103 points.

The range of the Table also narrowed. The 1971 Table ran from age next birthday 17, at 19.28, to age 85, at 3.13. The current Table runs from 20, at 9.188, to 81, at 4.611.

A cut in the factor did not mean a cut in the money. The Sixth Central Pay Commission revision that carried the new Table also raised pensions themselves, so the rupee lump sum a retiring pensioner received in September 2008 was larger than before despite the lower multiplier being applied to it. The two changes are separate, and only one of them, the Table, has any continuing effect.

Federations have pressed the point since. The Confederation of Central Government Employees and Workers has sought a fresh table on the ground that both inputs are stale, the mortality data being from 1994 to 1996 and the interest assumption from 2008. No revised table has been notified.

The 40% limit on the commutable slice

Rule 5(1) of the CCS (Commutation of Pension) Rules, 1981 caps a central civil pensioner at a fraction not exceeding 40% of basic pension. The factor decides what the slice is worth; the Rule 5(1) ceiling decides how large the slice may be, and the two are independent. Raising the ceiling would raise the lump sum; the factor of 8.194 would not change.

The ceiling operates on basic pension alone. Dearness relief, the additional pension in old age granted from 80 years, and any other addition are outside the commutable base, and none of them is multiplied by the factor.

Taken together on a basic pension of Rs. 50,000 at age next birthday 61: the maximum commutable slice is Rs. 20,000 a month, the factor is 8.194, the lump sum is Rs. 19,66,560, and the reduced basic pension is Rs. 30,000. The pension calculation article places the step in the full sequence from emoluments to the monthly figure the pensioner draws.

Which date fixes the age

The date on which the commutation becomes absolute, fixed by Rule 6 of the CCS (Commutation of Pension) Rules, 1981, is the date against which the age next birthday, and so the factor, is read. It is also the date from which the pension is reduced and from which the fifteen years to restoration begin to run. Three routes produce three different dates.

Routes and operative dates under Rules 6, 12, 13 and 19 of the CCS (Commutation of Pension) Rules, 1981.

The medical route costs a factor, not merely a fee. Because the operative date is the medical authority’s signature, an applicant frequently crosses a birthday in the interval between applying and being examined, and drops a row. A pensioner who retires voluntarily at 55 on a basic pension of Rs. 40,000 and commutes Rs. 16,000 inside the one-year window takes 8.572 against age next birthday 56, giving Rs. 16,45,824. The same pensioner examined after turning 56 takes 8.512 against age next birthday 57, giving Rs. 16,34,304. The delay costs Rs. 11,520.

Rule 21 requires the examination to be held before the applicant’s next birthday where that is possible, which is a direct acknowledgement that the date drives the money. The application machinery, the forms and the medical authority are set out in the commutation of pension article.

The reduced pension, dearness relief, and restoration

The pension is reduced by the commuted portion from the date the commutation becomes absolute, and the reduction runs for fifteen years. A pensioner on a basic pension of Rs. 50,000 who commutes the full Rs. 20,000 draws Rs. 30,000 of basic pension for that period.

Dearness relief is not reduced with it. It continues to be computed on the full un-commuted basic pension of Rs. 50,000, under Rule 52 of the CCS (Pension) Rules, 2021 as confirmed by Department of Pension and Pensioners’ Welfare Office Memorandum No. 42/15/2022-P&PW(D)/1. At the rate of 60% in force from 1 January 2026 that is Rs. 30,000 a month of relief, so total monthly receipts are Rs. 60,000 against Rs. 80,000 for an identical pensioner who did not commute.

Rule 10-A restores the commuted portion on completion of fifteen years from the date the reduction became operative, automatically and without a fresh application. The fifteen-year figure came from the Supreme Court in Common Cause (A Registered Society) versus Union of India, decided 9 December 1986 and reported at 1987 (1) SCC 142, made effective from 1 April 1985 and given effect by Office Memorandum No. 34/2/86-P&PW dated 5 March 1987.

The relationship between the factor and the restoration period is the part most often misstated. Undiscounted, a pensioner commuting Rs. 20,000 a month recovers the Rs. 19,66,560 in 98.328 months, about eight years and two months. The Seventh Central Pay Commission put the recovery at about twelve years once the interest element in the lump sum is counted, and retained fifteen years on the footing that the Government bears the risk of early death and recovers nothing from the family. The extra period prices that risk; it is not an arithmetic consequence of the factor of 8.194.

Tax treatment

The lump sum computed from the factor is received free of income tax by a government pensioner, with no monetary ceiling. Section 10(10A)(i) of the Income-tax Act, 1961 exempts the commuted value of pension received by an employee of the Central Government, a state government, a local authority or a statutory corporation in full. From the financial year 2026-27 the relief sits at serial number 7 of the Table in Section 19(1) of the Income-tax Act, 2025, which took effect on 1 April 2026 and reaches the same classes of employee without changing the treatment.

The exemption attaches to the lump sum alone. The reduced monthly pension drawn during the fifteen years is taxable as salary under Section 17(1)(ii), and so is the restored pension after, with the standard deduction of Rs. 75,000 available in the new regime. Commutation therefore converts a slice of taxable monthly income into a tax-free capital receipt, and restoration at fifteen years simply raises the taxable pension again from that date.

A non-government employee is treated differently and gets a partial exemption only, of one-third of the commuted value where gratuity is also received and one-half where it is not. The full exemption on Rs. 19,66,560 is one of the reasons the factor translates directly into cash in hand for a central government pensioner. The income tax for pensioners article carries the wider computation.

The defence table and the 50% limit

Armed forces pensioners read the same figures from a different instrument. The Table annexed to Ministry of Defence letter No. 17(4)/2008(2)/D(Pen/Pol) dated 12 November 2008 carries the same age-next-birthday values as the civil Table effective 2 September 2008, so a defence pensioner at age next birthday 61 also takes 8.194.

The ceiling differs. Rule 5(1) of the CCS (Commutation of Pension) Rules, 1981 caps a central civil pensioner at 40% of basic pension, while armed forces personnel may commute up to 50%. On a basic pension of Rs. 50,000 the civil pensioner commutes Rs. 20,000 and receives Rs. 19,66,560; the defence pensioner commutes Rs. 25,000 and receives Rs. 24,58,200 at the identical factor. The difference of Rs. 4,91,640 comes entirely from the ceiling, not from the Table.

The rest of the treatment tracks the civil position. Dearness relief runs on the full un-commuted pension in both cases, and the commuted portion is restored after fifteen years in both. The defence pay matrix and military service pay articles cover the pay side that feeds the pension the ceiling is applied to.

Application across the pension schemes

The commutation factor table belongs to the defined-benefit pension and nowhere else. A pensioner under the Old Pension Scheme, drawing a pension under the CCS (Pension) Rules, commutes up to 40% under Rule 5(1) and reads the factor from the Table exactly as this article describes.

Commutation availability by scheme. Only the first two involve a years’ purchase factor.

The Unified Pension Scheme carries no commutation. Its nearest analogue is the final withdrawal of up to 60% of the individual corpus under regulation 15(2) of the PFRDA (Operationalisation of Unified Pension Scheme under National Pension System) Regulations, 2025, notified 19 March 2025, and the difference is structural rather than cosmetic: a commuted pension is restored after fifteen years under Rule 10-A, whereas a final withdrawal reduces the assured payout permanently and reduces the family payout that follows it in the same proportion.

The National Pension System has no defined pension to commute at all. The subscriber withdraws part of the accumulated corpus at exit and buys an annuity with the balance, and the amount received depends on the corpus and the annuity rates offered, not on any years’ purchase figure. A subscriber deciding how much of the corpus to take in cash is making a different decision from a defined-benefit pensioner reading a row off this Table, and the two should not be compared factor for factor.

Whether the table will be revised

No revised commutation table has been notified, and none is in draft. The Table of 2 September 2008 has stood for eighteen years, through two pay commissions and the whole of the Seventh Central Pay Commission period.

The case for a revision is that both inputs are dated. The mortality basis is the LIC (1994-96) Ultimate table, drawn from experience thirty years old, and Indian life expectancy has risen since; longer lives would raise the years’ purchase. The interest assumption of 8% is well above the rate on small savings and government securities in 2026, and a lower assumed rate would also raise the factor. Both corrections point the same way, which is why pensioners’ federations have pressed the demand rather than the Government.

The official position has been consistent. In reply to Rajya Sabha Unstarred Question No. 430 on 22 July 2021, the Department of Pension and Pensioners’ Welfare stated that there was no proposal to revise the period of restoration of commuted pension, and recorded that neither the Sixth nor the Seventh Central Pay Commission had recommended a change to it. At the 34th meeting of the Standing Committee of Voluntary Agencies on 11 March 2025, the Department of Expenditure recorded that the restoration-period demand might be included in the terms of reference of the 8th Central Pay Commission, and the item was closed; the minutes were circulated by Office Memorandum No. 4/14/2025-P&PW(D)/E-10522 dated 25 March 2025.

The courts have declined to move the position. In Union of India versus Sub Trilok Chand (Retired), neutral citation 2026:DHC:4843-DB, a division bench of the Delhi High Court held the fifteen-year period to be a conscious policy determination founded on actuarial evaluation and rejected the simple recovery-period argument as one that ignores the mortality and discount assumptions embedded in the Table itself.

Bearing on the 8th Central Pay Commission

The 8th Central Pay Commission will not change the commutation factors by revising pay. The Commission was constituted by Department of Expenditure Resolution F. No. 01-01/2025-E.III(A) dated 3 November 2025 under Justice Ranjana Prakash Desai, and paragraph 5 of that Resolution gives it eighteen months to report, a window expiring on 3 May 2027. Its terms of reference cover the pension and retirement-benefit framework, so it may examine the Table, but a pay revision by itself leaves a mortality and interest table untouched.

What a pay revision does change is the pension the factor multiplies. A pensioner whose basic pension rises on the 8th Central Pay Commission recommendations, and who has already commuted, may commute a fraction of the increase under Rule 10 of the CCS (Commutation of Pension) Rules, 1981, at the factor for the age next birthday on the date that further commutation becomes absolute. The proviso to Rule 10-A gives each such commuted amount its own fifteen-year clock.

No revised factor can be stated as fact on account of the 8th Central Pay Commission. As on 15 August 2026 the Commission is in its consultation phase, has submitted no report and no interim report, and the 8th Central Pay Commission tracker records no Government statement on the commutation table. Until a revised table is notified, 8.194 at age next birthday 61 is the operative figure, and any projection of a different one is speculation.

Related Articles

• Commutation of pension
• Restoration of commuted pension
• Commutation of pension calculator
• Central government pension
• Central government pension calculation
• Revision of pension
• Minimum and maximum pension
• Retiring pension
• Residuary gratuity
• Dearness relief
• Dearness allowance
• Additional pension in old age
• Family pension
• Gratuity for central government employees
• Superannuation
• Voluntary retirement
• Invalid pension
• PPO and life certificate
• Central Pension Accounting Office
• Income tax for pensioners
• Standard deduction
• Old Pension Scheme
• Unified Pension Scheme
• National Pension System
• CCS (Pension) Rules, 2021
• Department of Pension and Pensioners’ Welfare
• Department of Expenditure
• Qualifying service
• Pay matrix
• Defence pay matrix
• Military service pay
• 7th Central Pay Commission
• 8th Central Pay Commission

External references

• Department of Pension and Pensioners’ Welfare
• Commutation table, Pensioners’ Portal
• Central Pension Accounting Office
• Department of Expenditure
• Income Tax Department
• Pension Fund Regulatory and Development Authority

References

1. Central Civil Services (Commutation of Pension) Rules, 1981: Rule 5(1) capping commutation at 40% of pension, Rule 5(3) ignoring a fraction of a rupee, Rule 6 fixing the date on which commutation becomes absolute, Rule 8 read with the Table appended to the Rules fixing the commuted value, and Rule 10 on further commutation after a retrospective revision of pension.
2. Department of Pension and Pensioners’ Welfare, Office Memorandum No. 38/37/08-P&PW(A) dated 2 September 2008, notifying the revised Table of commutation values based on the LIC (1994-96) Ultimate mortality table at 8% interest, applicable to every commutation becoming absolute on or after that date.
3. Table of commutation values effective 1 March 1971, based on a rate of interest of 4.75% per annum, as published by the Department of Pension and Pensioners’ Welfare, giving 15.87 at age next birthday 40, 10.13 at 60, 9.81 at 61 and 3.13 at 85.
4. Central Civil Services (Commutation of Pension) Rules, 1981, Rules 12, 13, 19 and 21, on the application routes, the classes exempt from medical examination, and the requirement that an examination be held before the applicant’s next birthday where possible.
5. Central Civil Services (Commutation of Pension) Rules, 1981, Rule 10-A, restoring the commuted portion of pension on completion of fifteen years from the date the reduction became operative, with the proviso giving each further commuted amount its own fifteen-year period.
6. Common Cause (A Registered Society) versus Union of India, decided 9 December 1986, reported at 1987 (1) SCC 142, fixing restoration at fifteen years with effect from 1 April 1985, given effect by Office Memorandum No. 34/2/86-P&PW dated 5 March 1987.
7. Central Civil Services (Pension) Rules, 2021, Rule 52, and Department of Pension and Pensioners’ Welfare Office Memorandum No. 42/15/2022-P&PW(D)/1, on dearness relief being calculated on the full un-commuted basic pension.
8. Income-tax Act, 1961, Section 10(10A)(i), and Income-tax Act, 2025, serial number 7 of the Table in Section 19(1), on the full exemption of the commuted value of pension received by a government employee.
9. Ministry of Defence letter No. 17(4)/2008(2)/D(Pen/Pol) dated 12 November 2008, annexing the commutation table applicable to armed forces pensioners, who may commute up to 50% of pension.
10. PFRDA (Operationalisation of Unified Pension Scheme under National Pension System) Regulations, 2025, notified 19 March 2025, regulation 15(2), on final withdrawal of up to 60% of the individual corpus and its permanent effect on the assured payout.
11. Rajya Sabha Unstarred Question No. 430, answered 22 July 2021, recording that there was no proposal to revise the period of restoration of commuted pension and that neither the Sixth nor the Seventh Central Pay Commission recommended a change.
12. Minutes of the 34th meeting of the Standing Committee of Voluntary Agencies held on 11 March 2025, circulated by Office Memorandum No. 4/14/2025-P&PW(D)/E-10522 dated 25 March 2025.
13. Union of India versus Sub Trilok Chand (Retired), neutral citation 2026:DHC:4843-DB, Delhi High Court, upholding the fifteen-year restoration period.
14. Department of Expenditure Resolution F. No. 01-01/2025-E.III(A) dated 3 November 2025, constituting the 8th Central Pay Commission, paragraph 5 fixing the eighteen-month reporting window expiring on 3 May 2027.