DoPPW issues OM with clarification on DR and commutation calculation

On October 25, 2022, the Department of Pension and Pensioners' Welfare (DoPPW) clarified the payment of Dearness Relief (DR) following the commutation of pension. The DoPPW has also made clear how much of a pension will be taken into account for commutation.

According to Rule 52 of the CCS (Pension) Rules, 2021, pensioners, including those receiving compassionate allowance under Rule 41, as well as family pensioners, are eligible for Dearness Relief on pension and family pension against price rise at the rates and under the conditions that the Central Government may from time to time specify.

The DoPPW clarified that the Dearness Relief is only payable on the initial basic pension, clearing up any confusion over whether it is available on basic pension or pension as decreased following commutation.

It was stated: "It is clarified that dearness relief is payable on the original basic pension prior to commutation or such basic pension prior to commutation as revised on implementation of recommendations of Pay Commission, etc. and not on the pension as reduced after deduction of commuted pension."

The DoPPW also dispelled any ambiguity regarding which pensions might be commuted. A government employee may commute in accordance with Rule 5 of the CCS (Commutation of Pension) Rules, 1981, in exchange for a lump-sum payment that is not greater than 40% of his pension.

The DOPPW stated that there was uncertainty regarding which pension, i.e., pension granted at the time of retirement or the pension altered afterwards and payable at the time of application for commutation, would be permitted to be commuted.

Rule 10 of the CCS (Commutation of Pension) Rules, 1981 states that a person who has commuted a portion of his final pension and whose pension has subsequently been revised and enhanced as a result of the Government's decision is entitled to the difference between the commuted value calculated with reference to the enhanced pension and the commuted value already authorised. The applicant won't need to submit a new application in order to pay the difference.

"According to this Department's OM No. 42/14/2016-P&PW (G) dated 24.10.2016, pensioners who retired between 01.01.2016 and 04.08.2016, i.e., the date of the issuance of orders for revised pay/pension based on the recommendations of the 7th CPC, may be given the option, in relaxation of Rule 10 of CCS (Commutation of Pension), Rules, 1981, not to commute the pension which has become additionally The DoPPW stated that situations, where the increased pension after the 7th CPC has already been commuted, won't be reopened.

"The pension which was originally sanctioned at the time of retirement only must be allowed to be commuted," it said, "in circumstances where the pension was granted on retirement before 01.01.2016 and the pensioner sought for commutation on or after 01.01.2016.