commutation

Commuted pension or lump sum received may be exempt in certain cases.For a government employee, commuted pension is fully exempt.For a non-government employee, it is partially exempt.

If Gratuity is also received with pension – 1/3rd of the amount of pension that would have been received if 100% of the pension was commuted is exempt from commuted pension and remaining is taxed as salary.

And in case only pension is received, gratuity is not received – ½ of the amount of pension that would have been received if 100% of the pension was commuted is exempt.

Courtesy: Cleartax