8th Pay Commission Pension Calculator: When we talk about a pay commission, the main focus usually is on central government employees since they play a crucial role in executing government policies nationwide. There is a lot of chatter about how their basic pay and various other allowances will be raised. However, discussions about pensioners don’t seem to attract the same level of interest even though there are more pensioners than employees. According to the government’s pensioners portal, as of October 30, 2025, there are 68.72 lakh pensioners, which includes those from civil, defence, telecom, railway and postal departments. In contrast, the number of central government employees is around 50 lakh.
Since the government has approved the Terms of Reference (TOR) for the 8th Pay Commission, set a deadline of 18 months to prepare a report and appointed Justice Ranjana Prakash Desai as the chairperson, central government pensioners are keen to find out about the pension hike that they can expect.
The fitment factor will play a key role in determining by how much the pensions will go up. The fitment factor acts as a multiplier for salary and pension hikes in a pay commission. For the 7th Pay Commission, it was set at 2.57, which means the basic salary of government employees increased by 2.57 times compared to their basic pension in the 6th Pay Commission. For the 8th Pay Commission, the fitment factor will be known once the Union Cabinet endorses the pay commission recommendations.
But is the basic pension the only thing that matters for pensioners during a pay commission? How can their pensions vary with different fitment factors? What changes can be expected for higher EPS, family and enhanced pensions in the new pay commission? Also, how will their taxes be affected by a new fitment factor? Let’s find out the answers to these questions.
Is the basic pension the only focus area for pensioners in the 8th Pay Commission?
Let’s first check out the pensioner-related topics that were brought up in the 8th Pay Commission Terms of Reference (TOR), which will serve as the blueprint for the commission’s report.
Answering an unstarred question raised by Bhubaneswar Kalita, Member of Parliament, on July 22, 2025 in the Rajya Sabha, Pankaj Choudhary, Minister of State, Ministry of Finance, presented the Terms of Reference for the 8th CPC forwarded by Secretary Staff Side NC(JCM) through the Department of Personnel & Training. The TOR presented included the following points related to pensioners-
A. To examine the existing structure of pay, allowances and other benefits/facilities, retirement benefits like pension/gratuity and other terminals benefits available to the following categories of employees:-
1. Central Government employees-industrial and non-industrial.
2. Personnel belonging to All India services.
3. Personnel belonging to the Defence Forces and Para Military Forces.
4. Personnel called Grameen Dak Sewaks belonging to the Postal Department.
5. Personnel of Union Territories.
6. Officers and employees of the Indian Audit and Accounts Department.
7. Officers and employees of the Supreme Court.
8. Members of Regulatory bodies (excluding RBI) set up under Act of Parliament.
9. Employees of Central Government Autonomous Bodies and Institutions.
10. To determine the percentage of Dearness Allowance / Dearness Relief immediately to be merged with Pay & Pension.
To work out the improvements needed to the existing retirement benefits like pension, death cum retirement gratuity, family pension, restoration of commuted portion of pension after 12 years, implementation of the Parliamentary Standing Committee’s recommendations for enhancement of pension after every 5 years, parity amongst the past and future pensioners.To review and restore the defined and non contributory Pension Scheme Under CCS (Pension Rules) 1972 (Now 2021) to the Central Government employees recruited on or after 1/1/2004.To recommend the parliamentary Standing Committee recommendation on CGHS related matter FMA and to recommend methods for providing cashless /hassle-free Medical facilities to the employees and pensioners including postal pensioners.
Manjeet Singh Patel, National President of the All India NPS Employees Federation, who has long been associated with the restoration of the Old Pension Scheme, says that the fitment factor is the main thing but there are a lot of key areas which stay in focus.
“A high fitment factor means a higher pension hike. But there are two key areas we want the government to fulfil. One is on commutation of salary. As per the current rules, if pensioners opt for a 40% pension commutation, they get reduced pension for 15 years. We want the government to reduce it to 12 years,” says Patel.
“Plus, there are a lot of areas where CGHS hospitals are not available and pensioners get a fixed Rs 3,000/month for their medical benefits. We feel for an aged person, it’s a meagre amount and it should be increased to Rs 20,000. More hospitals at the district level should also be brought under the CGHS service,” says Patel.
How pensioners can benefit from a high fitment factor and revised pay matrix?
Ramachandran Krishnamoorthy, Director – Payroll Services, Nexdigm, says that the fitment factor is a multiplier used to convert basic pay (and pensions) from the old pay structure to the new one.
For example, under the 7th Central Pay Commission (CPC), the fitment factor was 2.57. If the basic pay was Rs 10,000, it became Rs 25,700 in the new matrix.
If the government raises the fitment factor (say from 2.57 to 3.0 or 3.68), both serving employees’ pay and pensioners’ basic pension would rise proportionally.
How pensioners’ basic pension can increase at different fitment factors?Most central government pensioners get 50% of the last-drawn basic pay, as per the Old Pension Scheme (OPS).
When a new pay commission revises pay scales, a fitment factor is applied to the old basic pay to calculate the new pay.
Pensioners’ notional pay is calculated similarly, and the basic pension = 50% of notional pay.
Example of how it is calculated:
Old Basic Pay: Rs 40,000
Pension (50% of old basic pay): Rs 20,000
Revised Basic Pay: (Old basic pay × Fitment factor)
Lets calculate revised pension at different fitment factors:
Revised Basic Pension (50%)
At fitment factor 2.57
Rs 40,000 × 2.57 = Rs 1,02,800
Rs 1,02,800 × 50% = Rs 51,400
At fitment factor 3
Rs 40,000 × 3.0 = Rs 1,20,000
Rs 1,20,000 × 50% = Rs 60,000
At fitment factor 3.68
Rs 40,000 × 3.68 = Rs 1,47,200
Rs 1,47,200 × 50% = Rs 73,600
How can Rs 25,000 basic pension rise to Rs 50,000 in the 8th Pay Commission?If the fitment factor is 2.0, the basic pension can rise to Rs 50,000 in the new pay commission.
Rs 25,000X2= Rs 50,000.
How dearness relief for a pensioner can increase in the 8th Pay Commission?Dearness Relief (DR)
DR is calculated as a percentage of basic pension.
When basic pension increases due to a new pay commission, DR automatically increases in absolute terms.
For example:
Old Pension: Rs 20,000 → DR 20% = Rs 4,000
Revised Pension: Rs 30,000 → DR 20% = Rs 6,000
Observation: Higher basic pension → higher DR → better protection against inflation.
How can higher EPS, family and enhanced pensions be changed in the new pay commission?
Krishnamoorthy says EPS is usually a percentage of the pensionable pay or the last-drawn basic pay.
In case of central government pensioners, EPS is often tied to the last pay drawn or the revised pay after the pay commission.
Effect of a new pay commission:
Revised Pay → Higher EPS:
EPS is calculated based on the revised pay scale, often using a formula similar to:
Example:
Old basic pay Rs 40,000 → EPS Rs 20,000; after fitment factor 3.0 → revised basic pay Rs 1,20,000 → EPS Rs 60,000.
Enhancements are automatic if EPS formula is linked to the basic pay.
Family PensionPaid to surviving spouse/dependents after the pensioner’s death.
Typically a fixed percentage of the last-drawn basic pension (central government ~30%).
Revised basic pension → Higher family pension:
Example: Old pension Rs 20,000 → family pension 30% = Rs 6,000
Revised pension Rs 30,000 → family pension 30% = Rs 9,000
Enhanced pension usually refers to pension after completing 33 years or more of service, or pension enhanced due to commutation restoration.
Some schemes also offer enhanced pension for officers retiring after completing long service, sometimes under old rules (pre-2006)
Effect of new pay commission:Higher fitment factor → Enhanced Pension rises:
Enhanced pension is usually a percentage of revised basic pay.
Example:
Old enhanced pension Rs 25,000 → revised after fitment factor 3.0 → Rs 75,000 (assuming 50% of the revised pay).
Commutation restoration earlier (12 years instead of 15 in some 8th CPC proposals) increases the monthly pension earlier.
Will an increased pension in the 8th pay commission impact a pensioner’s taxation?Below is an explanation of how pensioners are taxed under the Income Tax Act:-
Regular pension (basic pension + DA/DR + other pension-linked allowances) is considered income from salaries.
Pension is added to other taxable income (interest, rent, etc.) and taxed according to the income tax slab applicable.
Family pension is taxable, but it has a separate exemption limit of Rs 15,000 per year for central government family pensions.
Example scenario
Old Pension (before 8th CPC)
Basic Pension: Rs 20,000 per month → Rs 2,40,000 per year
DA/DR: Rs 6,000 per month → Rs 72,000 per year
Total taxable pension income: Rs 3,12,000 per year
Income Tax (FY 202526, assuming individual <60 years, old tax slabs)
Up to Rs 3,00,000 → NIL (basic exemption)
Remaining Rs 12,000 → 5% = Rs 600
Revised Pension (after 8th CPC, higher fitment factor)Basic Pension: Rs 50,000 per month → Rs 6,00,000 per year
DR (same % of revised basic): Rs 15,000 per month → Rs 1,80,000 per year
Total taxable pension income: Rs 7,80,000 per year
Income Tax calculation (old slabs)Re 0 – 3,00,000 → NIL
Rs 3,00,001 – Rs 5,00,000 → 5% of Rs 2,00,000 = Rs 10,000
Rs 5,00,001 – Rs 7,80,000 → 20% of Rs 2,80,000 = Rs 56,000
Total tax = Rs 10,000 + Rs 56,000 = Rs 66,000 per year
Family Pension TaxationFamily pension is taxable under “Income from Other Sources”.
Exemption limit: Rs 15,000 per year.
Anything above Rs 15,000 is taxed at the normal slab rate for the beneficiary.