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The biggest news has come for about 69 lakh pensioners and 50 lakh government employees of the country. The government has approved the formation of the 8th Pay Commission. This commission, headed by former Supreme Court judge Ranjana Prakash Desai, will submit its report in the next 18 months.
Due to the number of pensioners being more than the employees, this time the Commission is facing the challenge of paying special attention to the demands and interests of the pensioners. With the news of formation, the biggest question in the mind of every pensioner is that how much money will increase in their pocket every month?
Let us understand this entire mathematics today in very simple language.
The ‘magic number’ to increase pension – what is this fitment factor?
The whole game of how much your pension will increase depends on one thing – Fitment Factor.
This is a kind of ‘multiplier’, by which your existing basic pension is multiplied to determine the new basic pension. For example, the fitment factor in the 7th Pay Commission was 2.57. That is, if someone’s old basic pension was ₹10,000, then the new basic pension was: 10,000 × 2.57 = ₹25,700.
What will be this fitment factor in the 8th Pay Commission, this is the biggest question, and your increase will depend on this.
Pension calculation: let’s understand with example
Suppose, the current basic pension of a pensioner is ₹20,000. Now let us see what his new pension will be based on different fitment factors.
| If the fitment factor is | So your new basic pension will be |
| 2.57 (as much as 7th Commission) | ₹51,400 (20,000 x 2.57 / 2) |
| 3.00 (Demand of Employees Union) | ₹60,000 (20,000 x 3 / 2) |
| 3.68 (if maximum demand is assumed) | ₹73,600 (20,000 x 3.68 / 2) |
(Note: Pension is calculated at 50% of the last basic salary, so we have calculated the new pension by estimating the basic salary.)
Can ₹25,000 pension become ₹50,000?
Yes, it is possible. If the government accepts the fitment factor as 2.0, then the basic salary of those whose pension is ₹ 25,000 will be recalculated as 25,000 x 2 = ₹ 50,000, which can lead to a huge increase in the pension.
Not just the basics, all of this will also increase!
The increase in pension will not only affect your basic pension but also every component related to it.
- Dearness Relief (DR): DR is a percentage of your basic pension. As soon as your basic pension increases, the DR amount received on it will also automatically increase.
- Old: 20% DR on ₹20,000 basic = ₹4,000
- New: 20% DR on ₹50,000 basic = ₹10,000
- Family Pension: It is 30% of the basic pension. If the basic pension increases, the pension received by the family will also increase.
- Old: At ₹20,000 = ₹6,000
- New: At ₹50,000 = ₹15,000
What are the other major demands of pensioners?
This time pensioners want relief not only on fitment factor but also on many other important issues:
- Old Pension Scheme (OPS): Demand to restore it for employees recruited after 2004.
- Better medical facilities: Demand to increase CGHS hospital and medical allowance from ₹3,000 to ₹20,000 per month in every district.
- Reducing commutation period: Reducing the recovery period for pension commutation from 15 years to 12 years.
But keep one thing in mind: tax burden will increase
It is also very important to know that the increase in pension will have a direct impact on your income tax.
| Description | old pension (example) | New Pension (Example) |
| annual basic pension | ₹2,40,000 | ₹6,00,000 |
| Annual DR (say 30%) | ₹72,000 | ₹1,80,000 |
| total taxable income | ₹3,12,000 | ₹7,80,000 |
| estimated tax | ~₹600 | ~₹66,000 |
While the increase in pension will bring great relief, on the other hand you will also have to be prepared for tax planning. Overall, the next 18 months will be one of hope and wait for pensioners.
