8th Pay Commission: Whenever discussions about the Eighth Pay Commission begin, attention usually turns to salary increases, but this time the picture is different. Pensioners now outnumber central government employees. According to the government’s pensioner portal, as of October 30, 2025, there are a total of 68.72 lakh pensioners in the country, while the number of central government employees is approximately 50 lakh. This is why pension reform has become the most important issue in the Pay Commission’s report this time.
The government has approved the Terms of Reference for the Eighth Pay Commission and has set an 18-month deadline for preparing the report. Former Supreme Court Justice Ranjana Prakash Desai has been appointed the Commission’s Chairperson. Now, the biggest question is how much pensions will increase after this commission and what will be its basis.
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How much will pensions increase due to the fitment factor?
The most important basis for salary and pension increases is the fitment factor. This is a multiplier based on which the old salary or pension is converted to the new structure. In the 7th Pay Commission, it was set at 2.57. For example, if someone’s old basic salary was ₹10,000, the new salary becomes ₹10,000 × 2.57 = ₹25,700.
There is now talk that this factor could be 3.0 or higher in the 8th Pay Commission. If this happens, both pension and salary will increase significantly. However, the final decision will be implemented only after Cabinet approval.
What will be the benefits for pensioners?
The Terms of Reference prepared by the government include not only the basic pension, but also several important pension-related benefits. These include provisions for pension, gratuity, family pension, restoration of commuted pension, provision for automatic pension increase every five years, consideration of reinstating the Old Pension Scheme, CGHS medical facilities, cashless treatment, and inclusion of dearness allowance (DA/DR) in pension.
Pensioners made these demands
According to Manjeet Singh Patel, National President of the All India NPS Employees Federation, the biggest demand of pensioners is to increase the fitment factor. He says that the commutation period should be reduced from 15 years to 12 years, as currently 40% of the pension is deducted. Furthermore, CGHS hospitals are not available in every district, so medical facilities should be ensured in all districts. There is also a demand to increase the medical assistance amount from the current ₹3,000 per month to ₹20,000.
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How will the pension be calculated?
Suppose a person’s old basic pay was ₹40,000, then their old pension would be ₹20,000 (50%). If the new fitment factor is set at 2.0, the new pension would be ₹20,000 × 2 = ₹40,000. If the factor is 2.5, this pension could go up to ₹50,000. That is, a nearly double increase in pension is possible.
What will be the impact on DA/DR?
Dearness relief is a percentage of the basic pension. For example, if the old pension is ₹20,000 and the DR is 20%, the pensioner receives an additional ₹4,000. However, if the new pension is ₹30,000, the DR will increase to ₹6,000. This means that as the fitment factor increases, the DR benefit will also increase, further increasing the total pension amount.
What will be the impact on EPS and family pension?
EPS is determined based on the last basic salary. When the new pay matrix is implemented, EPS will also automatically increase. Family pension, which is paid to the spouse or family after the pensioner’s death, is usually 30% of the basic pension. If the basic pension increases, the family pension will also increase proportionately. For example, if the old pension was ₹20,000, the family pension would be ₹6,000; now, with the new pension being ₹30,000, it could increase to ₹9,000.
What will be the impact on tax?
The increase in pension will also increase the tax base. For example, if someone’s old pension was ₹20,000 per month, it would be ₹240,000 annually. The total amount, including DR, is ₹312,000, plus tax of approximately ₹600. However, with the new pension of ₹50,000 per month, the annual amount will be ₹600,000, and the total, including DR, will be ₹780,000, with tax on this amount reaching ₹66,000. This means that the tax liability will increase as the pension increases, although the net income will still be higher.
