What is difference between commuted pension and gratuity?

Gratuity is the amount of money earned by an employee as a means of appreciation for his service to the company while pension is a certain amount paid in periodic instalments to a person after retirement.

How is commutation and gratuity calculated?

The formula for the retirement gratuity calculation is 1/4th of a month’s Basic Pay plus Dearness Allowance drawn on the date of retirement for each completed six monthly periods of qualifying service. There is no minimum limit for the amount of gratuity.

Is it good to take commutation of pension?

Again, even after pay commission effect, the gap between maximum commuted and non-commuted pension is only Rs 22,410 while the officer gets Rs 23.88 Lakhs as bulk if he commutes by 50\%. We strongly recommend that all officers should commute their pension to the maximum allowed 50\%.

What is the commutation formula?

Normal Family Pension ( in Rs.) Enhanced Family Pension (in Rs.) Amount of Pension Commuted (in Rs.) Reduced Monthly Pension after Commutation (in Rs.)…(Applicable to post-2016 civil pensioners)

What is interest rate on commutation?

10. What are the different rates of interest charged to pensioners for commutation of pension loan? Ans : For pensioners who retire prior to 01/01/2013 rate of interest is 4.75\%. After 01-01-2013, the rate of interest is 8\%.

How commutation is calculated?

Commuted Amount : Government Employee pension amount is Rs. 32000/- at the time of retirement, he / she commuted 40\% of his pension, then the commuted amount is 40 percent of Rs. 32000 i.e. 12800 is the commuted amount here.

How is commutation calculated?

What is pension commutation example?

Such pension received in advance is called commuted pension. For example, at the age of 60 years, you decide to receive 10\% of your monthly pension in advance for the next 10 years worth Rs 10,000. This will be paid to you as a lump sum. Therefore, 10\% of Rs 10000x12x10 = Rs 1,20,000 is your commuted pension.

How is gratuity calculated?

The calculation for this is: Gratuity = Average salary (basic + DA) * ½ * Number of service years. In this case, the service years are not rounded off to the next number. So if you have a service of 12 years and 10 months, you get gratuity for 12 years and not 13 years.

What are the rules of commutation?

Provided that where an applicant has been examined by a Medical Officer for the commutation of a percentage of provisional pension and such an applicant on assessment of final pension becomes eligible to commute an amount exceeding six thousand rupees per mensem, he shall be allowed the difference between the commuted …

What is the difference between a pension and a gratuity?

As against, the pension is a retirement plan, in which a particular sum is invested by the employer to guarantee payment to the employee after the termination of employment. Gratuity involves one-off payment in which the entire sum is provided by the employer at once.

What is commutation of pension?

Normally pension is paid as a periodical payment on monthly basis. Sometimes an employee forgoes a portion of the pension and receives a lump sum payment from the employer for the forgone portion of the pension This is called commutation of pension.

What is the gratuity payment?

Gratuity is paid to an employee on his/her superannuation/retirement from the service. The employees who have put in more than 5 years of continuous service (without interruption) in an organization are also eligible for the payment of gratuity.

How many years of service is required to get gratuity?

For the entitlement of pension, at least ten years of contributory service is required. On the other extreme, to become eligible for gratuity, a person needs to work for a minimum of 5 years with the same organisation.