Q.Shri Banerjee is a Member of the State Legislative Assembly. During the year he received a daily allowance while attending the sittings of the Assembly. Discuss the tax treatment of this receipt.

Allowances meant to cover an MP's or MLA's expenses while performing their duties are treated differently from their regular income.

Under Section 10(17), any daily allowance received by a Member of Parliament, or by a Member of a State Legislature or its Legislative Council, is wholly exempt from tax. This exemption reflects the purpose of the allowance: it is paid to cover the member's expenses while attending sittings of the House, not to reward them with additional taxable personal income. As Shri Banerjee received exactly this kind of daily allowance while attending Assembly sittings, the entire amount is exempt and does not form p …

Students sometimes assume the exemption is only partial (as with some other allowances elsewhere in the Act) — the DAILY allowanc …