💰 Tax Savings · Tax-free income (Section 10)
Commuted pension — exempt (old Section 10(10A))
✍️ EaseValue Advisors · Updated 18 Jul 2026 · FY 2025-26
In short
The lump-sum you take by commuting your pension is fully exempt for government employees, and partly exempt for others — old Section 10(10A).
The exemption
- Government employees: commuted pension is fully exempt.
- Non-government, with gratuity: 1/3 of the full commuted value is exempt.
- Non-government, without gratuity: 1/2 is exempt.
The regular monthly (uncommuted) pension remains taxable as salary.
Who it helps
Retirees choosing to commute part of their pension — being a receipt exemption, it applies in both regimes.
How to work out your exemption
- Government pensioner → the commuted amount is fully exempt; just report it.
- Private pensioner → exempt 1/3 (if you also get gratuity) or 1/2 (if not) of the full commuted value.
- The regular monthly pension stays taxable as salary.
The law behind it
old Section 10(10A)
General information for FY 2025-26 (AY 2026-27), not advice on your specific case. Limits, rates and conditions
change with each Finance Act and depend on your facts — confirm before acting. © EaseValue Advisors LLP.
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