Sharma, who was underdoing treatment here for a long time, is survived by wife, two sons and a daughter. His last rites will be performed at ancestral Jaalthap village in Morena district on Sunday.
His condition deteriorated on Friday and he was rushed to hospital where he breathed his last on Saturday morning.
Sharma, considered very close to senior party leader Jyotiraditya Scindia, was returned to the assembly in last year's election by defeating Bahujan Samaj Party candidate Maneeram Dhakad.
Condoling his death, Chief Minister Kamal Nath tweeted: "There is the news of the sad demise of our family member Banwari Lal Sharma, MLA of Jaura. He was ill for some time. His death is a personal loss for me. My heartfelt condolences to the family, may God grant him a place at his feet and give his family the strength to bear the grief.
Scindia also expressed grief over Sharma's death. "I offer deepest condolences on his sad demise and pray for peace to the departed soul. May God offer strength to the family to bear the loss."
State Public Health and Family Welfare Minister Tulsi Silavat termed the demise of the Jaura MLA a personal loss and said that Sharma set high ideals through his actions in politics. "All of us will always be guided by the ideals set by him," he said.
With his demise, the number of Congress MLA in the Assembly has come down to 114 in the 230-member Assembly.
After winning the Jhabua by-election, the Congress had 115 MLAs and an independent MLA as a minister.
( With inputs from IANS )