Purpose:
This section provides full tax exemption on certain allowances received by:
- Members of Parliament (MPs)
- Members of Legislative Assembly (MLAs)
- Members of Legislative Council (MLCs)
The exemption covers daily allowances and constituency allowances but not salaries.
Types of Exempt Allowances:
- Daily Allowance– Paid when MPs/MLAs attend Parliament/Assembly sessions.
- Constituency Allowance– For expenses related to their electoral constituency.
Example 1: Daily Allowance for an MP
- MP’s Salary:₹1,00,000/month (taxable under “Income from Salaries”).
- Daily Allowance:₹2,000/day for attending Parliament (15 days in a month).
- Total Allowance Received:₹30,000 (₹2,000 × 15 days).
- Salary (₹1,00,000):Taxable (not covered under Section 10(17)).
- Daily Allowance (₹30,000):Fully exempt from tax.
Example 2: Constituency Allowance for an MLA
- MLA’s Salary:₹75,000/month (taxable).
- Constituency Allowance:₹50,000/month (for public meetings, travel, office expenses).
- Salary (₹75,000):
- Constituency Allowance (₹50,000):Fully exempt under Section 10(17).
Example 3: Combined Allowances for an MLC
- MLC’s Salary:₹80,000/month (taxable).
- Daily Sitting Allowance:₹1,500/day (attended 20 days).
- Constituency Allowance:₹40,000/month.
Tax Calculation:
- Salary (₹80,000):
- Daily Allowance (₹1,500 × 20 = ₹30,000):
- Constituency Allowance (₹40,000):
Total Taxable Income: Only ₹80,000 (salary).
Key Takeaways:
✔ Daily & Constituency Allowances = Fully Tax-Free.
✔ Basic Salary = Taxable (Not covered under Section 10(17)).
✔ No upper limit – Entire allowance is exempt.
