The purpose of this study is to develop a contactless torque sensor in the mNm range. The applied optical method is based on the birefringe effect of photoelastic materials. The novelty of the modified reflective photoelastic method is the application of a photoelastic tube as a coupling and measuring element between shafts. Change in intensity of polarized light is proportional to the torque to be measured. Basics of operational principle and practical considerations are also discussed.