Mehar Chand Khanna was born in 1897 in the Peshawar of the North-West Frontier Province of Undivided India. His father was Karan Chand Khanna. He was elected as a member of the Legislative Assembly of the North-West Frontier Province from 1932 to 1947. He was the finance minister in the Coalition Government of Abdul Wayum Khan in 1937 but soon he was ousted by the Congress. He later joined Congress in 1945 and was appointed Finance Minister again in 1946 in the third Congress Ministry formed in NWFP. He was awarded the title of Rai Bahadur by the British Government but gave up the title later in protest to the British Raj.
He chose to stay in Pakistan after the partition but along with Khan Abdul Gaffar Khan. He was arrested by the Pakistani authorities for keeping the firearms. After his release, he and his family left their ancestral home in Peshawar for India in 1948. He served as the Minister of Rehabilitation in Independent India as he himself being a refugee was expected to understand their problems. He later served as the Law Minister of India. In the 1960s, he also served as the Minister of Housing. He passed away in 1970 in Delhi.