Daily and Constituency Allowance, etc. received by MPs and MLAs [Section 10(17)]

Being a Member of Parliament (MP) or a Member of Legislative Assembly (MLA) is a position of great responsibility. These elected representatives play a crucial role in shaping the laws and policies of our country. To support them in carrying out their duties effectively, MPs and MLAs are entitled to various allowances, including daily and constituency allowances.

Section 10(17) of the Income Tax Act, 1961, deals with the taxability of these allowances. Let’s take a closer look at what daily and constituency allowances are and how they are treated for tax purposes.

Daily Allowance

MPs and MLAs are provided with a daily allowance to cover their expenses while performing their official duties. This allowance is meant to cover expenses such as food, accommodation, and other incidental expenses incurred during their official tours or visits.

The daily allowance is exempt from income tax under Section 10(17) of the Income Tax Act. However, it is important to note that the exemption is subject to certain conditions. The exemption is available only for the period during which the MP or MLA is on official duty or on a tour approved by the government.

Constituency Allowance

MPs and MLAs also receive a constituency allowance to meet the expenses incurred in their respective constituencies. This allowance is provided to facilitate the smooth functioning of their offices and to address the needs of the constituents.

Similar to the daily allowance, the constituency allowance is also exempt from income tax under Section 10(17) of the Income Tax Act. However, the exemption is subject to certain conditions. The allowance must be utilized for the purpose it is intended for, i.e., to meet the expenses related to the functioning of the office and serving the constituents.

Taxability of Other Allowances

While daily and constituency allowances are exempt from income tax, it is important to note that not all allowances received by MPs and MLAs enjoy the same tax treatment. Other allowances, such as house rent allowance (HRA) and travel allowance, are taxable.

HRA received by MPs and MLAs is taxable under the head ‘Income from House Property’ as per the provisions of the Income Tax Act. Similarly, travel allowance is taxable as per the rules applicable to individuals.

Types of Allowance Exempted under Section 10(17):

The exemption under Section 10(17) is available for the following types of allowances:

• Daily allowance
• Constituency allowance
• Office allowance
• Secretarial allowance
• Travel allowance
• Medical allowance
• Hostel allowance

The exemption under Section 10(17) is available for the full amount of the allowances received by MPs and MLAs.

Examples of Exemptions:

Here are some examples of how the exemption under Section 10(17) works:

Example 1:      An MP receives a daily allowance of ₹2,000 and a constituency allowance of ₹5,000 per month. The MP is eligible for a tax exemption of ₹7,000 per month under Section 10(17).

Example 2:      An MLA receives a daily allowance of ₹1,000 and a constituency allowance of ₹2,500 per month. The MLA is eligible for a tax exemption of ₹3,500 per month under Section 10(17).

Example 3:      An MP receives a daily allowance of ₹1,000 and a constituency allowance of ₹5,000 per month. The MP is eligible for a tax exemption of ₹6,000 per month under Section 10(17).

Example 4:      An MLA receives a sitting fee of ₹500 per day and a travelling allowance of ₹1,000 per day. The MLA is eligible for a tax exemption of ₹1,500 per day under Section 10(17).

Points to be Note:

1. The exemption under Section 10(17) is available only for daily and constituency allowance received by MPs and MLAs. Other types of allowances, such as salary and pension, are taxable.
2. The exemption under Section 10(17) is available to all MPs and MLAs, irrespective of their political party affiliation.

The exemption under Section 10(17) is available for the full amount of the allowances received by MPs and MLAs.