Prasad was due to retire from service on July 31.
The extension of Prasad's service was approved by the Appointments Committee of the Union Cabinet under the rules of the All India Services (Death-cum-Retirement Benefits) Rules, 1958, an official release said.
The Union Cabinet had in June decided to amend the service rules to enable the government to grant extension in service to the cabinet secretary.
"The Union Cabinet has decided to amend the appropriate rules giving government power to grant extension to the government servant holding office of the cabinet secretary," Law Minister Arun Jaitley had told reporters after a Cabinet meeting on June 26.
Under the amended rules, government can grant an extension in public interest for such a period as it considers appropriate.
However, there would be an age limit of 62 for the post of cabinet secretary.
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