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New Commutation Table - How to calculate Gratuity and Pension - Terminal Benefits

"For payment of commutation amount the Commission has noted that various factors suggest that the procedure of restoration of commuted amount after 15years appears to be more than fair. However the Commission has recommended the a new table (Annex.5.1.2) for calculation of commutation values."


(New Commutation Table)

Retirement from Government service, the Government offers various retirement benefits to its employees as a measure of social security for their old age. The quantum of these benefits is dependant upon the factors.

The minimum qualifying service for superannuation pension is 20 years.

The average emoluments of last ten months or the pay last drawn

Ten years shall not be entitled to pension

The minimum pension of Rs.3500

Family pension shall be calculated at a uniform rate of 30%

It may be noted here that, the term ‘Emoluments’ has a different connotation for the calculation of pension and gratuity. For the calculation of pension, ‘Emoluments’ refers to Basic Pay+ Grade Pay. However, for the purpose of the calculation of gratuity the term ‘Emoluments’ includes Dearness allowance as on the date of the retirement of a government servant.

The phrase ‘Qualifying service’ refers to the total duration of service put in by a government servant after reducing any period of non qualifying service such as periods of dies non, suspension specified as non qualifying service or any other period of absence not regularized as leave.

The amounts payable to a government servant upon retirement from service can be classified into 2 categories.

1.Retirement benefits.
2. Other dues.

The first category includes the following:
2.Commutation value of pension.

Other dues which become payable upon retirement are:
2.Leave Encashment
3.GPF balance.

For the timely payment of retirement and other benefits the timely lodging of a claim with the Head of office is a must. Government servants due to retire must submit completed claim forms to their Heads of offices atleast 6 months before their retirement to ensure that all benefits are paid to them timely. The Heads of office process the pension papers as per the rules and forward the same to CCA offices for effecting payment to the retiring official.

Also to avoid any unnecessary payment related complication in the event of the death of a government servant it is essential that all government servants submit a copy of completed nomination forms for GPF, Gratuity and Insurance to their Heads of offices for attaching in their service books. Further, government servants should also verify their service books once annually and see whether all entries pertaining to service verification, insurance and pension contribution, leave etc. have been properly recorded in them. Any discrepancy in these entries should be brought to the knowledge of the Head of office at the earliest.

Calculation of Superannuation pension

The formula for the calculation of superannuation pension is as given below:

50% of the emoluments drawn during the last month

For example:
emoluments drawn during the last month = Rs.12000.00
Dearness Allowance rate on the date of retirement = 16%
Qualifying service = 28 years
Age on retirement = 60 years
Commutation desires = 40%
In the above case pension will be equal to 1/2 x 12000 = Rs. 6000.00

The minimum amount of pension payable is Rs.3500 and the minimum amount of qualifying service entitled for pension is 20 years.

Calculation of Retirement gratuity

Retirement gratuity is admissible to all employees after completion of 5 years of qualifying service. The quantum of gratuity payable is also derived from the emoluments (but here DA on the date of retirement is also included) @ ½ of emoluments for each completed 6 monthly period of qualifying service subject to a maximum of 16 ½ times the emoluments from Rs. 3.5.lacs to raised 10 lakh. Therefore in the above example the amount of gratuity payable would be:
13920 (Pay + DA) x 66/4 = Rs.229680.00.

Gratuity is not payable to retirees against whom disciplinary / vigilance proceedings are pending at the time of retirement, till the conclusion of such proceedings.

Calculation of Commuted Value of pension

As per the CCS (Pension) Rules, the government also gives an opportunity to its employees to commute a part of their pension in return for a lumpsum payment. The maximum percentage of pension which can be commuted under these rules is 40%. Upon the receipt of the lumpsum commuted value of pension, the pensioner draws reduced pension to the extent of the amount commuted, for 15 years. Thereafter, his pension is restored to full. Commuted value of pension is not payable to retirees against whom disciplinary / vigilance proceedings are pending at the time of retirement, till the conclusion of such proceedings.

In the above example the amount of pension admissible for commutation will be calculated in the following manner:
40/100 x 6000 = Rs. 2400

The amount of lumpsum payable in lieu of the commuted amount is determined by means of a Commutation Table (given above) containing the commutation factors. The formula for working out the lumpsum payable is as follows.

Amount offered for Commutation x 12 x Commutation factor.

Therefore in the above case the amount will be equal to 2400x12x8.194 = Rs.2,35,987

The reduction in the amount of pension on commutation will become operative from the date of receipt of the commuted value by the pensioner, or at the end of three months after the issue of authority for payment, whichever is earlier. For the restoration of the commuted value of pension upon completion of 15 years, the pensioner should apply to the pension disbursing authority i.e., Post office / Bank in the

Encashment of Earned leave

The encashment of earned leave at credit at the time of retirement. The amount of leave encashment payable is worked out in the following manner. Emoluments (Pay +GP)/30 x No. of days of EL credit subject to max. 300 days Therefore in the above case the leave encashment payable would be; 13920/30 x 300 = Rs. 139200.00 (For 300 days of earned leave.)

General Provident Fund

The GPF balance at the credit of the employee becomes due for payment at the time of his retirement. GPF subscription is to be compulsorily discontinued during the last 3 months of service on superannuation. The employee should fill up the form for final payment and submit in his office. After processing of the same the form shall be forwarded to the concerned CCA office, which shall make arrangement for the payment of the principal and interest in the GPF account of the subscriber.

Revision of Special Allowance and Cash Handling Allowance – Recommendations of the Sixth Central Pay Commission

No.4/6/2008-Estt. (Pay II)
Government of India
Ministry of Personnel, Public Grievances & Pensions
Department of Personnel & Training

New Dlehi the 1st October, 2008


Subject:       Revision of Special Allowance and Cash Handling Allowance – Recommendations of the Sixth Central Pay Commission.

      Consequent upon the decision taken by the Government on the recommendations made by the Sixth Central Pay Commission and in supersession of this Department’s O.M. No. 4/4/97-Estt. (Pay II) dated 22.4.98 and O.M. No.4/5/97-Estt. (Pay II) dated 5.5.98 on the subject of Special Allowance and Cash Handling Allowance respectively, the President is pleased to double the existing rates of these Allowances. The rates of these allowances will be increased by 25% every time the Dearness Allowance payable on revised pay scales goes up by 50%.

2.       These orders shall be effective from 1st September, 2008.

3.      Insofar as persons serving in the Indian Audit & Accounts Department are concerned, these orders issue after consultation with the Comptroller & Auditor General of India.

4.       Hindi version follows.

(Rita Mathur)

DOPT Order

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