How to calculate pension and commutation?

by | Sep 30, 2023 | Retirement Pension | 35 comments

How to calculate pension and commutation?




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Pension and Commutation Calculation: How does it work?

Pension is a crucial aspect of any retirement planning. It provides financial security to individuals after they retire from their jobs and enables them to maintain a comfortable lifestyle. Similarly, commutation is another important factor to consider when it comes to retirement planning. In this article, we will take a closer look at how pension and commutation are calculated in India.

Pension Calculation:
The calculation of pension in India is primarily based on a formula that takes into account the following factors:

1. Length of Service: The number of years of service an employee has completed affects the pension amount they are entitled to. Generally, the longer the period of service, the higher the pension.

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2. Average Salary: The average salary drawn by the employee during the last few years of service is considered for calculating the pension. The basic salary, along with any dearness allowance, is taken into account.

3. Pension Percentage: The pension percentage is determined based on the rules and regulations set by the respective pension scheme. It is usually a percentage of the average salary.

The formula for calculating the pension is as follows:

Pension = (Length of Service x Average Salary) x Pension Percentage

For example, if an employee has completed 30 years of service, the average salary is Rs. 50,000, and the pension percentage is 50%, the pension amount would be:

Pension = (30 x 50,000) x 0.50 = Rs. 7,50,000

Commutation Calculation:
Commutation refers to the option of receiving a lump sum amount from the pension instead of the full pension amount. In other words, a portion of the pension is converted into a lump sum payment. The commutation factor determines the percentage of the pension that can be commuted. In India, the maximum commutation allowed is generally 33.33%.

The formula for calculating commutation is as follows:

Commuted Value of Pension = (Pension Amount x Commutation Factor) / 100

For example, if the monthly pension amount is Rs. 10,000, and the commutation factor is 33.33%, the commuted value of pension would be:

Commuted Value of Pension = (10,000 x 33.33) / 100 = Rs. 3,333.33

It’s important to note that the commuted value of pension is paid as a lump sum, and the remaining pension amount after commutation is received on a monthly basis.

In conclusion, pension and commutation calculations form an integral part of retirement planning. It is essential for individuals to have a clear understanding of how these calculations are made and the factors involved. By ensuring accurate calculations, individuals can make sound financial decisions and enjoy a secure and comfortable retirement phase.

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35 Comments

  1. RAGHU U

    కమ్యూటేసన్ ఫక్కుటర్ తెలుపండి

  2. Anjan

    Thank you sir

  3. Aryan Anwar

    Medical invalidation paina retire ayna vektiki commutation vastaunda sir ?

  4. ps rk

    Sir what is the commutation factor in RPS 2022

  5. Tsk

    Sir ma father veterinary dept lo office sub ordinate ga chesthunnaru konn reasons valla voluntery retirement pettukunnaru kani valla department vallu oka office nundi inko office tipputhunnaru voluntery retirement approval cheyadaniki, ayana physically diabled person but aa officers ademichudakunda tipputa vunnaru e month ending ki approval chestamu antunnaru last 5 months appudu pedate ippatiki avvuthundi adi kuda vallu (father and mother) tiruguthu vunte. Repu retirement approval ayyaka retirement benifits akkada rayinchukovali, pension akkada rayinchukovali, avi avariki pampali? Plz clarify and aa officers meda amaina action tesukovatiniki vuntunda, ma mother and father meda chinna chupu chusaru oka veterinary doctor, retirement benifits gurinchi adigite byta rayinchukondi antunnaru, mari byta vallu rastara vallaki ala telustadi antha rayali ani, application akkada dorukutaye ela doubts vunnaye plz clarify

  6. Beerkuri Raghupathi Rao

    Well explained sir. Can you explain how to calculate leave account in respect of probationers

  7. Ashok Gaddam

    ఫామిలీ పెన్షన్ ను కూడా లెక్కించవలసింది

  8. vishnu kumar pendayala

    full pension raney valla situation entey / kontha mandey key total service 20 years vunadey +5 years add cheystey 25 years vachey naa full pension rada / Telangana looeppudu 70 years kudeyncharu /antey 70 years taruvatha full pension vastunada cheypagalau / vacheydey cheyparu/ service sareygaa leyney valla situtaion endey adey kooda cheypandey pl

  9. Ramesh Mandha

    Commutation restore not explained

  10. kesava rao ivvala

    Chala Baga explain chesar sir
    Commutation period ?

  11. AHMED SYED

    Sir is commutation of pension is compulsory (mandatory) or mana ishtama, please clarify

  12. AHMED SYED

    Is commutation of pension is compulsory (mandatoey) cheyala or

  13. Sudheer Babu Kalintha

    Sir, Basic: 60260,Age:52years, Service:20years. Communication 40% ayithe approx. amount? Plz Sir.

  14. sivaram k

    Nice.. But explanation in paper or board is much better

  15. sandeep reddy

    Sir medical invalidation employee ki pension ela caluclation chestaru?

  16. Bhagavatula Bhaskara Subbarao

    Addl quantum of pension for 75 years – completion of 75 or entering into 75 years – anybody please clarify

  17. A.jacquline Jacq

    Sir my husband retirement year2017. And he expired 15/1/2020. Nakku commutation pension eppududhakka vasthundi sir

  18. Kambhampati Anuradha

    Sir I am completed 22 years of service, my basic pay is 44820 at the time of retirement .how much pension will get in 2022 percent in Andhra

  19. Krishna kumar Ready

    Will pensioners get 12 months PRC da arrears quantum in march

  20. raj k

    Annexture 15 widow pension form kavali any one send me

  21. saibabu challapally

    Sir e commutation Yanni years cut avthundhi

  22. Maheshbabu Saleti

    Commuted deductions enni years deduct avutundi

  23. krishna reddy

    Kindly inform when will the pensioner receives full pension after recovery of total commuted pension.

  24. Md Shanawaz

    Central family pention D.A ela lekka gadutharo chepthara

  25. Swarupa Rani

    Sit can I withdraw commutation pension amount my father has retired 6years back @58

  26. Rajendhar

    Excellent sir, చాలా సులువుగా అర్థమయ్యేటట్టు చేప్పారు

  27. Sakinala Bhoopal

    Sir one doubt service pension fix అయిన తర్వాత service pension మీద DA Calculation చేస్తారా,commutation పోను మిగిలిన pension పై DA లెక్కిస్తారా

  28. G L Rao

    Can it be sent by Email?

  29. srinivas venkata

    Sir,1.7.2018 tharuvatha retire ayinavallaku commutation mariyu el encashment monitary benifit ku link lekunda emaina vastunda

  30. mirzameraj baig

    Sir 2013 lo retire ayna wallaki ipudu announce chesina kota 2018 prc prakaram communication value vastunda

  31. balu angam

    Please post the link related to pension commutation calculator

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