ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Q: Which among the following allowances is paid to employees in order to enable them to face the increasing price of essential commodities? Ans: The correct answer is D. Dearness Allowance is a cost of living allowance paid to employees, to help accommodate the constantly increasing cost of living.

Detailed explanation-2: -Taxable Allowances Dearness Allowance: Dearness Allowance (DA) is an allowance paid to employees as a cost of living adjustment allowance paid to the employees to cope with inflation.

Detailed explanation-3: -Dearness allowance is a cost of living adjustment that the Government pays to public sector employees and pensioners. It is calculated as a percentage of basic salary to curb the effect of inflation.

Detailed explanation-4: -Dearness Allowance can be understood as a component of salary which is some fixed percentage of the basic salary, aimed at hedging the impact of inflation. Since DA is directly related to the cost of living, the DA component is different for different employees based on their location.