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Rule 308Published

Rule 308: Limit on commutation of annuity from a superannuation fund

Rule 308 limits how much of an annuity can be commuted (taken as a lump sum). Rules 301 to 315 govern approved superannuation funds under Part B of Schedule XI to the Act. If the employee receives gratuity, commutation cannot exceed the commuted value of one-third of the annuity; otherwise, one-half. The commuted value is based on the recipient's age, health, the interest rate and officially recognised mortality tables.

Official notified Income-tax Rules, 2026

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This article is for general information. Read the official Rules and applicable Act amendments, including the Taxation and Other Laws (Amendment) Act, 2026. If you need professional advice for your situation, contact Bizeneed.

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Bare law

Rule 308 - Commutation of annuity

Any payment in commutation of annuity shall not exceed—

(a) in a case where the employee receives any gratuity, the commuted value of one-third of the annuity which he is normally entitled to receive, and

(b) in any other case, the commuted value of one-half of such annuity, such commuted value being determined having regard to the age of the recipient, the state of his health, the rate of interest and officially recognised tables of mortality.

Rule breakdown

Limits

With gratuity: up to the commuted value of one-third of the annuity.

Without gratuity: up to the commuted value of one-half.

Valuation

Age of recipient.

State of health.

Rate of interest.

Officially recognised mortality tables.

Key takeaways

One-third

If gratuity is received.

One-half

In other cases.

Actuarial basis

Commuted value uses age, health, interest and mortality tables.

Practical checklist

  • Check whether gratuity is received before choosing commutation.

Avoid

  • Do not commute more than the permitted fraction.

FAQs

How much can I commute if I get gratuity?

Up to the commuted value of one-third of the annuity (Rule 308(a)).

And if I do not get gratuity?

Up to the commuted value of one-half (Rule 308(b)).

How is commuted value determined?

Having regard to age, health, rate of interest and officially recognised mortality tables.

Glossary

Commutation
Converting part of a periodic annuity into a lump sum.
Mortality tables
Officially recognised tables used to value the annuity.

Official sources

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