EPF act clearly says that you need to deduct PF contributions on Basic+DA only. Allowances are not required to be deducted. There are several court orders on this available in the internet.
You can ask him to inform that instructions in writing. Act says as follows:
Sec 2(b) “basic wages” means all emoluments which are earned by an employee while
on duty or on leave or on holidays with wages in either case in accordance with the
terms of the contract of employment and which are paid or payable in cash to him,
but does not include-
(i) the cash value of any food concession;
(ii) any dearness allowance that is to say, all cash payments by whatever name
called paid to an employee on account of a rise in the cost of living, house-rent
allowance, overtime allowance, bonus, commission or any other similar allowance
payable to the employee in respect of his employment or of work done in such
employment;
Sec 6. Contributions and matters which may be provided for in Schemes. – The contribution which shall be paid by the employer to the Fund shall be ten percent. Of the basic wages, dearness allowance and retaining allowance, if any, for the time being payable to each
of the employees whether employed by him directly or by or through a contractor, and the employee‟s contribution shall be equal to the contribution payable by the employer in respect of him and may, if any employee so desires, be an amount exceeding ten percent of his
basic wages, dearness allowance and retaining allowance if any, subject to the condition that the employer shall not be under an obligation to pay any contribution over and above his contribution payable under this section:
Provided that in its application to any establishment or class of establishments which the Central Government, after making such inquiry as it deems fit, may, by notification in the Official Gazette specify, this section shall be subject to the modification that for the words “ten percent”, at both the places where they occur, the words “12 percent” shall be substituted:
Provided further that where the amount of any contribution payable under this Act involves a fraction of a rupee, the Scheme may provide for rounding off of such fraction to the nearest rupee, half of a rupee, or quarter of a rupee.
Explanation I – For the purposes of this section dearness allowance shall be deemed to include also the cash value of any food concession allowed to the employee.
Explanation II. – For the purposes of this section, “retaining allowance” means allowance payable for the time being to an employee of any factory or other establishment during any period in which the establishment is not working, for retaining his services.