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Commuted Value Formula:
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Commuted Value (CV) of pension represents the lump sum amount that a pensioner can receive in advance by surrendering a portion of their monthly pension. This is a common option in government and corporate pension schemes where retirees can opt for partial commutation.
The calculator uses the commuted value formula:
Where:
Explanation: The commutation factor is determined by the government and varies with the pensioner's age at the time of commutation. Higher factors are assigned to younger ages.
Details: Calculating commuted value helps pensioners make informed decisions about whether to take a lump sum amount or continue with regular monthly pension payments. It's crucial for financial planning and retirement management.
Tips: Enter your monthly pension amount in INR and your current age in years. The calculator will automatically determine the appropriate commutation factor and compute the lump sum amount you would receive.
Q1: What is the maximum percentage of pension that can be commuted?
A: Typically, up to 40% of the pension can be commuted for government employees, but this may vary by scheme and organization.
Q2: How is the commutation factor determined?
A: Commutation factors are prescribed by the government and are based on age. They represent the present value of future pension payments.
Q3: Is the commuted amount taxable?
A: In many jurisdictions, the commuted portion of pension is fully or partially exempt from tax, but rules vary by country and tax laws.
Q4: Can I commute my pension after retirement?
A: Commutation is usually allowed only at the time of retirement, though some schemes may have provisions for later commutation.
Q5: What happens to the remaining pension after commutation?
A: After commutation, you receive the remaining percentage of pension as monthly payments for life, which is generally restored after 15 years.