Pension is the amount received after retirement by employee.

Normally,it is received monthly or quarterly.

However,sometimes,employee says that he doesnot want monthly pension .He instead asks for lumpsome payment.

This lumpsome payment is called Commuted pension

 Also,sometimes,employee commutes only part of his pension.Hence he receives both 

  • Lumpsome Payment (called Commuted Pension)
  • Monthly Pension (called Uncommuted Pension)

 Hence we can say,pension is of 2 types

  • Commuted Pension
  • Uncommuted Pension 





 Uncommuted Pension  Commuted Pension
 It refers to pension received periodically.(Monthly ,Quarterly or Annually) It  means lump sum amounttaken by commuting the whole or partof the pension.
Taxability  Taxability

For All types of Employees

It is fully TAXABLE for all

It is exempt as follows

For Central Government /State Government

Employees or Member of Defence Forces

Fully Exempt


For Other Employees

There can be 2 cases

1.If Employee gets Gratuity Also

1/3 of Amount Received if he had commuted

whole of pension

2.If Employee Does not get Gratuity

1/2 of Amount Received if he had commuted

whole of pension 


Pension -Commuted and Uncommuted Pension - Taxability Of Retirement Benefits


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CA Maninder Singh

CA Maninder Singh is a Chartered Accountant for the past 13 years. He also provides Accounts Tax GST Training in Delhi, Kerala and online.