When you hear the word “salary,” you probably think of monthly pay, bonuses, or maybe deductions. But there’s a lesser-known benefit tucked inside the Income Tax Act—Section 10(17). This provision specifically provides a list of incomes exempt from taxation, aimed at easing the tax burden on a very specific group: salaried professionals holding legislative and constitutional positions.
Let’s decode what this section is, who benefits from it, and how you can take advantage of it (if eligible).
What is Section 10(17) of the Income Tax Act?
Section 10(17) offers income tax exemption to certain types of allowances received by specific individuals. These allowances are granted to:
- Members of Parliament (MPs)
- Members of State Legislatures (MLAs/MLCs)
- Individuals holding similar legislative roles
The idea behind this exemption is that these individuals incur expenses in the course of their public service. To cover those costs, they are granted allowances, which should not be taxed like regular income.
Types of Allowances Exempted Under Section 10(17)
Here’s what’s specifically exempted under this clause:
- Daily Allowance – This covers daily expenses incurred for attending meetings or sessions.
- Constituency Allowance – Received by MPs & MLAs to manage constituency-related activities.
- Other Allowances – As specified by the government from time to time to facilitate their legislative duties.
In simple words, Section 10(17) provides a tax rebate to salaried professionals who serve the public by occupying positions in Parliament or legislative assemblies.
Why is This Important?
These exemptions are not just about saving tax; they are about recognising the nature of public service. Imagine if every rupee spent on public duties was taxed—it would discourage capable individuals from stepping into roles that serve the nation.
Moreover, it helps to ensure that allowances meant for public service are not treated as personal income, thereby aligning taxation with intent."
How is it Different from Other Salary Exemptions?
Most salaried individuals claim deductions under Section 10(14) or Section 16, like HRA or professional tax. However, Section 10(17) is exclusive—it’s only applicable to those serving in a legislative capacity.
It’s also different from Section 10(10) (gratuity) or Section 10(38) (capital gains), because Section 10(17) directly relates to the functioning of democratic responsibilities.
Is There a Limit on the Exemption?
No, the exemption is not subject to a maximum ceiling, as long as the amount falls under the notified categories mentioned above. However, the allowances must be officially sanctioned & documented.
How to Claim the Exemption?
If you’re eligible, you don’t have to do anything extraordinary. Just:
- Report the exempt allowances under the ‘Exempt Income’ section while filing your ITR.
- Maintain proof of the allowances received (salary slips, appointment letters, official notices).
- Keep your Form 16 or official salary certificate that mentions the components.
If you’re unsure about how to report this correctly, consulting a tax expert is always a good idea.
Common Confusions About Section 10(17)
- “Is this applicable to all salaried individuals?”
It only applies to MPs, MLAs, and similar public servants. - “Can private employees or government officers claim this?”
They can claim other sections like 10(14), 10(13A), etc., but not 10(17)."
Real-Life Scenario
Imagine an MLA receiving ₹50,000 as constituency allowance & ₹10,000 as daily allowance. Under Section 10(17), the entire ₹60,000 is exempt from income tax, and they only need to pay tax on their remaining salary and other income sources.
Conclusion: A Small Yet Powerful Tax Relief
Section 10(17) of the Income Tax Act 1961 might not apply to the majority, but for those in public service, it plays a crucial role in ensuring tax fairness. It recognises the sacrifices & expenses involved in serving the country and offers targeted tax relief to salaried professionals in the government.
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