Capital expenditures

From CAG Handbook

- Capital expenditure may be generally defined as expenditure incurred with the
object of either increasing concrete assets of a material and permanent character
or of reducing recurring liabilities.
- It is not essential that the concrete assets should be productive in character or
that they should even be revenue producing. A productive asset may be
considered as one which produces sufficient revenue to afford a surplus over all
charges relevant to its functioning. It may on rare occasions be necessary and
justifiable to treat as capital a scheme not commercially remunerative but
involving large expenditure, say for the construction of a new city.
- It is inherent in the definition of capital expenditure that the assets produced
should belong to the authority incurring the expenditure. Expenditure by
Government on grants-in-aid to local bodies or institutions for the purpose of
constructing assets which will belong to these local bodies or institutions cannot
legitimately be considered as capital expenditure.
- Expenditure on a temporary asset cannot ordinarily be considered as
expenditure of capital nature.
In Meghalaya, capex is for the cost of acquiring or constructing the residence,
additions and alterations
in rents of leased residences. (From FRSR)
From Wiki: Capital expenditures means the expenditure the benefit of which is not
exhausted within the current year but is enjoyed over a long time period. Such
expenditure is of non-recurring nature and results in acquisition of permanent
assets.
to acquire or upgrade physical assets such as property, industrial buildings or
equipment
Included in capital expenditures are amounts spent on:
1 acquiring fixed, and in some cases, intangible assets
2 repairing an existing asset so as to improve its useful life
3 upgrading an existing asset if it results in a superior fixture
4 preparing an asset to be used in business
5 restoring property or adapting it to a new or different use
6 starting or acquiring a new business
Charged expenditure
Article 113 (1) of Constitution of India specify "the estimates of expenditure
CHARGED upon the Consolidated Fund of India shall not be submitted to the Vote
of Parliament". That means charged expenditure doesn't require the approval of
Parliament. However there is no restriction on either House of Parliament
discussing any of these estimates (charged), where after funds are sanctioned by
the President.
The meaning of "Charge" (adjective) is "to impose on". In reality too, Charged
expenditure is imposed on Consolidated fund instead of obtaining the approval of
Parliament, because of the requirement of safeguarding the interest of
constitutional bodies.
The concept of Charged expenditure and its specific privilege is in operational in
European countries too.
Examples of Charged expenditure:
a) The salary, allowances and pension payable to or in respect of CAG of India.

Any amounts required to satisfy any judgment, decree or award of any Courts or
awards of Arbitrators where made into rule of court
Any other expenditure declared by the Constitution or by Parliament by law to be
so charged.
Rationale: To safeguard the freedom/interest of judiciary, constitutional bodies like
President of India, Vice- President of India, Speaker,CAG etc, the expenditure
related to these are placed outside the scope of approval of Parliament. Otherwise
they are not able to discharge their duties independently.
How is this different from Voted Expenditure?
1. Requires approval of Parliament.
2. Rationale: In Democratic country like India, the Govt. cannot spend from the
Consolidated Fund unless the expenditure is voted in the lower house of the
Parliament. Because the real power lies in public. Parliament which consists of
representatives of Public i.e., Members of Parliament have control on the
expenditure to be met from Consolidated Fund of India.
LTC
Leave Travel Concession covers rules under the Central Civil Services (Leave
Travel Concession) Rules, 1988.
and are applicable to those
(i) who are appointed to civil services and posts including civilian Government
servants in the Defence Services in connection with the affairs of the Union;
(ii) who are employed under a State Government and who are on deputation with
the Central Government;
(iii) who are appointed on contract basis; and
(iv) who are re-employed after their retirement.
(4) These rules shall not apply to
(a) Government servants not in whole-time employment;
(b) persons in casual and daily rated employment;
(c) persons paid from contingencies;
(d) Railway servants;
(e) members of the Armed Forces;
(f) local recruits in Indian Missions abroad; and
(g) persons eligible to any other form of travel concession available during leave
or otherwise.
4. Definitions.- In these Rules, unless the context otherwise requires, (a) "a place in India" will cover any place within the territory of India, whether it is
on the mainland India or overseas;
(b) "controlling officer" means an officer declared as such under Supplementary
Rule 191;
(c) "Disciplinary Authority" shall have the same meaning as assigned in clause (g)
of Rule 2 of the Central Civil Services (Classification, Control and Appeal) Rules,
1965;
(d) "Family" means:(i) the Government servants wife or husband, as the case may be, and two
surviving unmarried children or step children wholly dependent on the
Government servant, irrespective of whether they are residing with the
Government servant or not;
(ii) married daughters who have been divorced, abandoned or separated from
their husbands and widowed daughters and are residing with the Government
servant and are wholly dependent on the Government servant;
(iii) parents and/or step mother residing with and wholly dependent on the
Government servant;
(iv) unmarried minor brothers as well as unmarried, divorced, abandoned,
separated from their husbands or widowed sisters residing with and wholly

dependent on the Government servant, provided their parents are either not alive
or are themselves wholly dependent on the Government servant.
(e) "hometown" means the town, village or any other place declared as such by
the Government servant and accepted by the controlling officer;
(f) "shortest direct route" shall have the same meaning as given in Supplementary
Rule 30 and orders issued thereunder from time to time.
7. Admissibility of Leave Travel Concession.(1) The leave travel concession shall be admissible to persons of the categories
specified in clauses ( i ) and (iii) of sub-rule (3) of Rule 1 only, if they have
completed one years continuous service under the Central Government on the
date of journey performed by him or his family, as the case may be, to avail of the
concession.
(2) The leave travel concession shall be admissible during any period of leave,
including casual leave and special casual leave.
8. Types of leave travel concession.(a) The leave travel concession to hometown shall be admissible irrespective of
the distance between the headquarters of the Government servant and his
hometown, once in a block of two calendar years, such as 1986-87, 1988-89 and
so on.
(b) the leave travel concession to any place in India shall be admissible
irrespective of the distance of the place of visit from the headquarters of the
Government servant, once in a block of four calendar years, such as 1986-89,
1990-93 and so on:
Provided that in the case of a Government servant to whom leave travel
concession to hometown is admissible, the leave travel concession to any place in
India availed of by him shall be in lieu of, and adjusted against, the leave travel
concession to hometown available to him at the time of commencement of the
journey;
(c) A Government servant whose family lives away from him at his hometown
may, in lieu of all concessions under this scheme, including the leave travel
concession to visit any place in India once in a block of four years which would
otherwise be admissible to him and members of his family, choose to avail of
leave travel concession for self only to visit the hometown every year.
9. Counting of leave travel concession against particular blocks.A Government servant and members of his family availing of leave travel
concession may travel in different groups at different times during a block of two
of four years, as the case may be. The concession so availed of will be counted
against the block of two years or four years within which the outward journey
commenced, even if the return journey was performed after the expiry of the
block of two years or four years. This will apply to availing of leave travel
concession carried forward in terms of Rule 10.
10. Carry over of leave travel concession.A Government servant who is unable to avail of the leave travel concession within
a particular block of two years or four years may avail of the same within the first
year of the next block of two years or four years. If a Government servant is
entitled to leave travel concession to home town, he can carry forward the leave
travel concession to any place in India for a block of four years only if he has
carried forward the leave travel concession to home town in respect of the second
block of two years within the block of four years.
14. Forfeiture of claim.A claim for reimbursement of expenditure incurred on journey under leave travel
concession shall be submitted within three months after the completion of the
return journey, if no advance had been drawn. Failure to do so will entail forfeiture
of the claim and no relaxation shall be permissible in this regard.
F.R. 7 (4)
Compensatory allowance means an allowance granted to meet personal
expenditure necessitated by the special circumstances in which duty is
performed. It includes a traveling allowance, but does not include a sumptuary

allowance.
NOTE : In view of the importance attached to the correct classification of additions
to pay
such as special pay and compensatory allowance, it can be accepted as a general
principle that the reasons for the grant of such additions to pay should be briefly
recorded in the latter or memorandum conveying the sanction. In cases, however,
in
which an official record in an open letter may be undesirable, it should be possible
to
communicate the reasons confidentially to the audit authority.
Traveling allowance during study leave.
Meghalaya S.R. 108
A government servant to whom study leave had been granted shall not
ordinarily be paid traveling allowance but the Governor may in exceptional
circumstances sanction the payment of such allowance.
Traveling allowance for medical
When a patient is required to travel from his
headquarters to a referred Hospital on the advice of the
Authorised Medical Attendant as provided in these rules,
he/she shall, if he/she is a Government servant,. Be entitled
to travelling allowance by air, rail or road as on tour for
journeys from his headquarters to the referred hospital and back.
(2) A member (patients) of a Government servants
family who is not a Government servant will be entitled to the same rates of
travelling allowance as applicable to the Government servant.
(3) A Government pensioner or his spouse will be
entitled to the rates of travelling allowance which the pensioner was entitled to
immediately before his retirement.
OVERDRAFT
An extension of credit from a lending institution when an account reaches zero. An
overdraft allows the individual to continue withdrawing money even if the account
has no funds in it. Basically the bank allows people to borrow a set amount of
money.
An overdraft is a sum of money extended to you as credit by your bank, set at a
pre-arranged limit when your account balance drops below zero.
Banks usually charge interest on any amount of overdraft you use, but the terms
and price of overdrafts will vary between providers.
You can use a bank overdraft to manage your cashflow, but it's probably not
suitable if youre looking for long-term funding.
Overdraft is an important way for auditors to continue gauging assets and their
performance and/or liabilities.
An overdraft can also be accounted for the gross fiscal deficit. According to
Rajaraman & Mukhopadhyay (1999) who construct an aggregated debt series
(Centre and States) for the period 1951 to 1997, he items included by them,
relevant for the States, are: Internal debt (excluding WMA and Overdrafts from RBI
or other banks), Provident Funds and Reserves and Deposits.
A bank overdraft, for example, is a temporary facility extended by a bank to
corporates and other clients to withdraw funds from their account in excess of the
balance. This facility is provided by the bank for a fee and interest is charged on
the excess amount that is withdrawn for the length of the time. It is important to
know the advantages and disadvantages of the bank overdraft facility in order to
use it effectively.

An overdraft facility allows the facility holder to withdraw money from the account
despite having no balance. There is usually a limit on the amount that can be
overdrawn from the account. The overdraft limit is usually set by the banks basis
the amount of working capital and credit worthiness of the facility taker.
Advantages of Bank Overdraft:
6 Handles Timing Mismatch of Flow of Funds: A bank overdraft is usually
helpful for a business where it has cash flows moving in an out many times
during a month. In other words, if sales proceeds and purchases result in
flow of money in and out many times during a week / month; an overdraft
facility allows managing cash flow gaps that might arise due to timing
mismatch.
7 Helps in Keeping Good Track Record: It helps to maintain a good payment
history as any payment made via cheque does not bounce due to
insufficient funds, which may have been made against some receivable,
which may come a couple of days later.
8 Timely Payments: It also aids in ensuring that timely payments are made
and no late payments penalties are faced, as payments would be made
even if there is no balance in the account.
9 Less Paperwork: Overdraft facility is usually easy to avail compared to long
term loans which may require more paperwork.
10 Flexibility: Overdraft facility is flexible in the nature that one may take it
whenever required for whatever amount (up to the limit allotted) and for
even as less as one or two days.
11 Benefit in Interest Cost: Since the interest is calculated only on the amount
of funds utilized, there are great savings in the interest cost when
compared to a normal loan taken on fixed interest rate. In other loans, you
have to pay interest even if you are not using the money. The meter of
interest starts with the payments you make but it stops instantly when
there are receipts.
Disadvantages of Bank Overdraft:
Higher Interest Rates: Overdraft facility comes with a cost. The cost is
usually higher than the other sources of borrowing. Also if one goes above
or exceeds the overdraft limit, the charges thereby are much higher.
Risk of Reduction in Limit: Overdraft facility is a temporary loan and
undergoes regular revisit by the bank. Hence, it runs a risk of decrease in
the limit or withdrawal of the limit. The withdrawal of limit may happen
usually when company financials may represent poor performance; hence
the facility may be withdrawn largely when the company may require it the
most.
Risk of Seizing: Bank overdraft facility may at times be secured against
inventory or other collateral like shares, life insurance policies etc.
Company may run risk of those assets being seized, if it fails to meet
payments.
Debtors Collection becomes Lethargic: At times, availability of overdraft
facility may make the company less strict on the collection of debtors
payment. In other words, a company may not be too much on their feet to
collect payments from debtors, as immediate payment outflows can be
managed by overdraft facility.
Conclusion:
Overdraft is a temporary facility obtained by the companies to meet their ultrashort term cash shortage / requirement. One needs to bear in mind that such
facility comes with high cost and should be used as a stop gap management of
funds or as an emergency activity rather than a routine funding activity. Higher
dependence on overdraft for working capital management indicates poor working
capital management and a liquidity constraint faced by the company. Only
temporary working capital should be financed by bank overdraft. The permanent
working capital should be financed by long term loans having lower interest rates.

Increment
The service of probationers in the State and Subordinate Service and in special
post sanctioned by the Government of Meghalaya count as duty for increments
under the Fundamental Rule 28(a) before confirmation, if the scale of pay fixed for
a particular service or post provides for the grant of increments during the
probationary period. The service of persons appointed on probation to the post
with incremental scale of pay in which there is no stage for probationary period
also counts as duty for increments.
F.R. 7(26)
(a) Time scale pay means pay which subject any conditions prescribed
in these rules, rises by periodical increments from a minimum to a maximum.
(b) Time-scales are said to be identical if the minimum, the maximum,
the period of increment and the rate of increment of the time-scales
are identical.
(c) A post is said to be on the same time-scale as another post on a
time-scale if the two time-scales are identical and the post fall within
a cadre, or a class in a cadre, such cadre or class having been
created in order to fill all posts involving duties of approximately the
same character or degree of responsibility, in a service or
establishment or group of establishments; so that the pay of the
holder of any particular post is determined by his position in the
cadre or class and not by the fact that he holds that post.
F.R. 23
The initial pay of a government servant who is appointed to a post on a
time-scale of pay is regulated as below :(i) Where a government servant holding a post in a substantive,
temporary or officiating capacity is promoted or appointed in a
substantive, temporary or officiating capacity to another post
carrying duties and responsibilities of greater importance than
those attaching to the post held by him, his initial pay in the timescale
of the higher post shall be fixed at the stage next above the
pay notionally arrived at by increasing his pay in respect of the
lower post by one increment at the stage at which such pay has
accrued.
NOTE :- (4) :- When the next increment in the time-scale of either the new or the
old
post falls due, the government servant should draw the next increment in the
time-scale of the old
post. The personal pay is given to a government servant only for the purpose of
initial pay and not at
any subsequent stage in the new time-scale in which the government servant
might draw less pay
than he would have drawn had he remained in the old time scale.
F.R. 25
The holder of a post; the pay of which is changed, shall be treated as if he
were transferred to a new post on the new pay ; provided that he may at his
option retain his old pay until the date on which he has earned his next or any
subsequent increment on that old scales or until he vacates his post or ceases to
draw pay on that time-scale. The option once exercised is final.
BUDGET COMMUNICATION
Communications and the Budget Process
12
Communication is the essence of the budget process. All aspects of the
process are aimed at
0
communicating a position and persuading others as to the desirability of

adopting the proposed actions, or

understanding what is being communicated.

Budget requests attempt to convince approving authorities that the request is

worthy of approval. Much work goes into achieving this, especially within
the constraints imposed by the recipients, who are located higher in the
governmental hierarchy and are in a position to dictate the format and
extent of the budget request.
Those who receive the requests establish systems for:

limiting the requests since resources are finite and demands are not (and
communicate their desires to those who have to prepare budget
requests), and

assuring efficiency in understanding and handling the information that is

being communicated since superiors do not want to miss important
matters that may get lost in a mass of information used to support
a request.
What is Communicated
There is conflict in the budget process because many players are
attempting to persuade, sometimes for mutually exclusive purposes.
Ultimately, a case is made as best it can be made, and decisions are
made on the case presented.
Budget as a communication tool that shows how the conflicts
inherent in the process
Information Management
The steps and actions leading to the presentation of the budget request
involve extensive summarization of information. There is a premium on
making the point economically since there is only so much that a
reviewer can absorb at a time.
The technical aspects of the budget (such as financing schedules)
summarize information that is important for understanding the nature
of what the department expects to do.
The budget documents are a communication tool, as are the hearings,
justifications, and other parts of the process.
At each step there is a communication element,
both written and oral, and what is to be communicated as well as
how it is communicated are vital to the success of the agency and
its operating components in obtaining resources.
The communication
of the results of the use of resources is as important
as the promises made in the process of obtaining the resources.
At each of these junctures the budget has to communicate the
agency's and its managers' position.

Information efficiency is essential in the budget process.

Given the large size of the Federal government, summary information
must be used by decision makers. A pyramid of information is involved
in the process, with less and less detail being transmitted to higher levels.
This process lends itself to automation, to rationalization, and,
unfortunately, to large errors stemming from miscommunication.
Copyright 1998-2010 Laszlo Bockh and Mary Blakeslee
COMMUTED LEAVE

13. Commuted Leave.- 13 (1) Commuted leave not exceeding half the amount of half pay leave due may be granted on medical certificate to
a member of the Service subject to the condition that twice the amount of such leave shall be debitable to the half pay leave due.
13 (2) Commuted leave for a period not exceeding ninety days may be granted to a member of the Service during his entire service when
such leave is availed of for course of study which is certified to be in public interest by the Government.
13 (3) No commuted leave may be granted under this rule unless the Government has reason to believe that the member of the Service will
return to duty on its expiry.

13

(4) Where a member of the Service who has been granted commuted leave resigns from service or, at his request, is permitted to
retire voluntarily without returning to duty, the commuted leave shall be treated as half pay leave and the difference between
leave salary in respect of commuted leave and half pay leave shall be recovered. Provided that no such recovery shall be made if
the retirement is by reason of ill-health incapacitating the member of the Service for further service or in the event of his death.

FROM FR/SR Half Pay Leave Due means the amount of half pay leave
calculated as prescribed in S.R. 93 for the entire service diminished
by the amount of half pay leave including twice the amount of
commuted leave taken.
(vi) Commuted Leave means leave taken under S.R.94.
Half pay leave
S.R 93
(a) A government servant (other than military officer) shall be entitled to
half pay leave of 20 days in respect of each completed year of service.
(b) The leave due under clause (a) may be granted on medical certificate
or on private affairs :
Provided that in the case of a government servant not in permanent
employ, no half pay leave may be granted unless the authority competent to
grant leave has reason to believe that the government servant will return to duty
on its expiry except in the case of a government servant who has been declared
completely and permanently incapacitated for further service by a medical
authority.
(c) If a government servant is on leave on the day on which he completes
a year of service, he shall be entitled to half pay leave without having to return to
duty.
Commuted leave
82
S.R 94
(a) Commuted leave not exceeding half the amount of half pay leave may
be granted on medical certificate to an officer subject to the following conditions:(i) When commuted leave is granted twice the amount of such leave shall
be debited against half pay leave.
(ii) Half pay leave upto a maximum of 180 days shall be allowed to be
commuted during the entire service without production of medical
certificate where such leave is utilized for an approved course of study,
i.e., a course which is certified to be in the public interest by the leave
sanctioning authority.
(iii) That the total period of earned leave and commuted leave taken in
conjunction each other shall not exceed 240 days at a time.
(iv) The authority competent to grant leave is satisfied that there is
reasonable prospect of the government servant returning to duty on its
expiry.
(v) The authority competent to grant leave obtains an undertaking from
the government servant that in the event of his resignation, or retiring
voluntarily from service, he shall refund the difference between the
leave salary drawn during commuted leave and that admissible during
half pay leave.
(vi) Where a government servant who has been granted commuted leave
resigns from service or at his request permitted to retire voluntarily
without returning to duty, the commuted leave shall be treated as half
pay leave and the difference between the leave salary in respect of

commuted leave and half pay leave shall be recovered :

Provided that no such recovery shall be made if the retirement is by
reason of ill health incapacitating the government servant for further service or in
the event of his death.
(b) Commute leave may be granted at the request of the government
servant even when earned leave is due to him.
MATERNITY LEAVE

18. Maternity leave.- 1820 (1) Maternity leave may be granted to a woman member of the Service with less than two surviving children on full
pay upto a period of 135days from the date of its commencement. During such period, she shall be paid leave salary equal to the pay drawn
immediately before proceeding on leave.
18.(1)(b).PATERNITY LEAVE: A male member of the service with less than two surviving children may be granted parernity leave for a period
not exceeding 15 days during the comfinement of his wife provided that notwithstanding anything contained in rule3,paternity leave under
this rule shall not ordinarly be refused.
18(2)- such leave shall not be debited to the leave account .

Vide Notification No.11019/6/97-AIS(III),dated 9.3.1998.

18 (3) Maternity leave may be combined with leave of any other kind.
Notwithstanding the requirement of production of medical certificate contained in
rule 13 and rule 14, leave of the kind due and admissible (including commuted
leave for a period not exceeding 60 days and leave not due) upto a maximum of
one year, may, if applied for, be granted in continuation of maternity leave
granted under sub-rule (1).
Note: Maternity leave may be granted in cases of miscarriage including abortion
subject to the condition that the leave applied for does not exceed six weeks and
the application for leave supported by a medical certificate.
Vide Notification No.11019/2/90-AIS(II),dated 6.2.1997
21 18(A) :- Leave to a female member of service on adoption of child-: A female
member of the service on her adoption of a child may be granted leave of the
kind due & admissible (including commuted leave without production of medical
certificate for a period not exceeding 60 days and leave-not-due) upto one year
subject to the following conditions:
(i) The facility will not be available to an adoptive mother already having two
living children at the time of adoption
(ii) The maximum admissible period of leave of the kind due and admissible will
be regulated as under
(a) If the age of the adopted child is less than one month, leave upto one year
amy be allowed;
(b) If the age of the child is six months or more leave upto six months may be
allowed.
(c) If the age of the child is nine months or more leave upto three months may be
allowed.
FROM FR/SR
Maternity Leave
S.R. 111
*(1) A competent authority subject to the limit of two surviving children
in the entire service period may grant to a female government servant, maternity
leave for a period of 120 days from the date of commencement. However, in the
case of still-born delivery, the grant of maternity leave exceeding the above limit
shall also be admissible. During such period, she shall be paid leave salary equal
to the pay drawn immediately before proceeding on leave.
*Correction Slip No. 78 wef 23/12/2009 vide Notification No. FEG.25/2010/3 Dt.
23rd March 2011
(2) Maternity leave may also be granted incase of miscarriage including
abortion subject to the condition that the leave does not exceed six weeks and
the application is supported by a certificate from the Authorized Medical
Attendant.
(3) (a) Maternity leave may be combined with leave of any other

kind.
(b) Notwithstanding the provisions contained in sub-rule (1) any
leave (including commuted leave) for a period not exceeding sixty days, applied
for in continuation of maternity leave, maybe granted without production of
medical certificate.
(4) Leave is further continuation of leave granted under clause (b) of
sub-rule (3) maybe granted on production of a medical certificate for the illness
of the female government servant. Such leave may also be granted in case of
illness of newly born baby, subject to production of medical certificate to the
effect that the condition of the ailing baby warrants mothers personal attention
and that her presence by the babys side is absolutely necessary.
*[S.R. 111-A
Paternity Leave A competent authority, subject to the limit of two
surviving children in the entire service period, may grant paternity leave for a
94
period of seven days to the spouse of a female government servant during the
confinement of his wife for child-birth. During such period, he shall be paid leave
salary equal to the pay drawn immediately before proceeding on leave. The leave
is not debitable to Leave account and may be combined with any other kind of
leave except casual leave.]
COMMUTATION OF PENSION
Commutation of Pension means payment of lump sum amount in lieu of a portion
of pension surrendered voluntarily by the pensioner based on a duration of period
in relation to the age. This is purely an optional facility provided by the
Government to the pensioner.
Following is exempted from Commuted pension: 1/3 of the total pension.(If he also
receives gratuity) or 2/3 of total pension(If he doesnt receive any gratuity)
Uncommuted pension is always taxable.
COMMUTED PENSION : CERTAIN % OF PENSION TO BE RECEIVED IN FUTURE IS
COMMUTED BY THE RETIRED ONE. WHAT EVER THE AMOUNT COMMUTED
RECEIVED IN LUMSUM IS EXEMPTED IN THE HANDS OF GOVT EMPLOYEES. IN CASE
OF PRIVATE EMPLOYEES 1/3 OR 1/2 OF PENSION WHICH HE IS ENTITLED TO
RECEIVE IS EXEMPTED. EG. PRIVATE EMPLOYEE COMMUTED 25% & COMMUTED
PENSION IS rS. 50000. THE 1/3 OR 1/2 OF (50000/25%) IS EXEMPTED. UN
COMMUTED PENSION: WHICH MEANS REGULAR AMOUNT OF PENSION RECEIVED
BY RETIRED ONE EVERY MONTH WHIS IS TAXBLE AS SALARY .
Restoration of Commuted Pension:
Commuted portion of your pension can be restored after 15 years from the date of
receipt of the commuted value of your pension, based on your application. Please
apply for the same to your PDA in the prescribed form.
Commutation of Pension:
Commuted portion of pension is required to be reduced from pension from the
date of payment of the commuted value of the pension or after three months from
the date of issue of PPO or from the date, capitalized sum is credited to the
pensioners account. If the commuted portion of pension is not reduced as above,
bring this to the notice of your PDA immediately to avoid a heavy recovery later.
FROM RULES REGARDING TAMIL NADU GOVERNMENT
4.1 Commutation of Pension means payment of lump
sum amount in lieu of a portion of
pension surrendered voluntarily by
the pensioner based on a duration
of period in relation to the age.

This is purely an optional facility

provided by the Government to
the pensioner. The duration is
fixed with reference to age as
number of years purchased. If
the age at the next birthday of a
retiring employee is 59 years, he
will be entitled to get 10.46
years portion of pension he
surrenders. If the pensioner is
eligible for the pension of Rs.2000
and he opts to commute 33 1/3 %
of the amount he will be entitled
to receive Rs.65,113 as follows:
2000 x 33.33 x 8.14 x 12 / 100
Originally,
the maximum portion of the
pension that could be commuted
was one half of the pension and it
was reduced to 1/3 in 1960. As per
G.O. 174 Fin 21.04.1998, the
maximum rate that could be
commuted from 01.04.1998 is
40% of the pension. From
01.04.2003, the maximum limit
for commutation portion of
pension is 33 1/3% of pension
(G.O 74 Fin 19.03.2003). From
01.04.2003 the Government have
approved a new commutation
value table under Rule 7 of the
Civil Pension Commutation Rules
1944. (G.O 135 Fin 30.04.2003).
As per this revised table if the age
at the next birthday of a retiring
employee is 59 years he will be
entitled to get 8.14 years of
portion of pension he surrenders.
If the pensioner is eligible for the
pension of Rs. 2000/= he opts to
commute 33 1/3% of the amount
he will be entitled to receive Rs.
65,113 as follows.
2000 x 33.33 x 8.14 x 12 /100
4.2 The Commutation of pension was subject to certification by medical
authority to the effect that the Pensioners physical health and prospects of
duration of his life are such as to justify commutation. With effect from
28.02.1978 this condition was relaxed to the extent that in case the commutation
is opted within one year of retirement, the medical board certificate is not
necessary. He is at liberty to commute the portion of the pension at any time
after his retirement but he has to produce medical board certificate if it is done
after one year of retirement. In case of compulsory retirement, medical certificate
is essential even if it is done within one year of retirement ( Letter 1909/87-3 Fin
07.09.1987). From 1985, the option to commute the portion of the pension has to
be indicated the regular pension application form which the employee has to be
submit normally one year prior to his date of retirement and no separate
application for commutation is necessary G.O.989 Fin10.09.1985 .
4.3 If he commutes a portion of pension, such portion of
the pension shall be deducted

from his monthly pension for a

period of 15 years from the date
of such commutation. The
commuted portion will be restored
after 15 years by the pension
disbursing officer.
The conditions for restoration are :
i) Reckoning of 15 years period for the purpose of restoration of commuted
pension will be from the date of retirement if the commutation was simultaneous
with the date of retirement.
ii) In other cases, from the date of commutation like cases of further
commutations allowed during revision of pension on II, IV Pay Commission
reports.
iii) All commutations whether 1st or 2nd or subsequent commutation for which
authorisation was issued by the Accountant General or Pension disbursing officer
prior to 07.12.1990, shall be treated as past cases and commuted portion of
pension will be restored without insisting on any condition, on completion of 15
years from the date of retirement irrespective of the date of commutation.
iv ) All applications submitted to the Accountant General prior to 07.12.1990 but
authorisation from him received after 07.12.1990, are treated as past cases and
to be restored after 15 years from date of retirement (G.O.242 Fin 01.04.1981,302
Fin 04.05.1981 letter 108043 / 92 1 Fin 30.10.1992 ).
4.4 Commutation shall become absolute on the date of application by
Government employee or from the date following the date of retirement which
ever is later or at the end of the 3 months after the issue of authorisation by the
Accountant General for payment of commuted value of the pension or date of
next birthday of pensioner whichever is earlier. ( G.O. 788 Fin 23.07.1985, 42 Fin
13.01.1987, letter 13224 /86 2 Fin 09.06.1986, Rule 9A of Civil Pension
Commutation Rules).
4.5 In case of commutation based on the medical
examination, the commutation
shall take effect from the date on
which the medical authority affix
signature on the medical
certificate / report. (G.O.558 Fin
11.08.1993 ).
4.6 A Commutation once given effect to can not be rescinded and commuted
portion restored on refund of its capitalised value.
4.7 If the pensioner dies on or after the day following that on which commutation
took effect but before receiving the commutation value, such value shall be paid
to his heirs. Annexure III Under Rule 12 of the C.P.C. Rules provides for nomination
to receive commuted value of pension in the event of the death of the pensioner.
(G.O.307 Fin 13.05.1982 ).
4.8 Commutation is not permissible in cases of
employee who retires without
prejudice to the pending
disciplinary proceedings. If the
proceedings are finalised with
punishment, commutation shall be
allowed based on the date on
which final orders are issued.
Where he is exonerated,
commutation shall be allowed on
the original application and value
will be decided with reference to
the age at the time of retirement.
(Letter 98690/93-5 Fin
07.06.1995) After finalisation of
proceedings the employee has to

submit a fresh application for

commutation and in case he dies
before the proceedings are
finalised, commutation shall be
allowed on the pending
application with reference to the
age in his original application
letter 13767 / 92 6 Fin
07.10.1992, 11057 / 93 7 Fin
05.04.1995.
4.9 Restoration of commuted portion of pension has to be done by Treasury with
out insisting life certificate and formal application from the Pensioner. Rule 2(iii),
G.O. 41 Fin 13.01.1987 letter 72119/91- 19 Fin 10.07.1992.
4.10 Restoration of commuted portion of Pension by the Public Sector Banks is
allowed. (Letter 56364/98 Fin 17.03.1992).