New Delhi: The Labour Ministry has asked the Employees' Provident Fund Organisation (EPFO) not to go ahead with a proposal to club allowances with basic pay for provident fund deductions, according to a source, a step that will deprive 5 crore subscribers of higher savings.

"EPFO has got a letter from the Labour Ministry asking it not to go ahead with clubbing of allowances with basic pay. The EPFO will soon issue a notification," the source said.

According to experts, the move would have increased the savings of organised sector workers under schemes run by the retirement fund body. It would also have reduced the take-home pay of the subscribers and increased the financial burden on employers.

The EPFO had issued a circular on November 30, 2012, redefining the meaning of "basic wages" for the purpose of PF deductions and said, "All such allowances which are ordinarily, necessarily and uniformly paid to the employees are to be treated as the basic wages."

The retirement fund body also proposed to limit enquiries into PF deposits made by companies to a period of seven years. However, the notification was put in abeyance and the EPFO set up a committee to look into the matter and recommend further action to the ministry.

The committee had supported the idea of enhancing social security benefits under the EPF scheme run by the retirement fund body.

Putting the 2012 circular in cold storage would also mean that the EPFO can seek information from employers about PF deposits made on behalf of workers without a time limit.

The circular had said, "No inquiry or investigation shall ordinarily go beyond seven years, i.e., it shall cover the period of default not exceeding preceding seven years."

The open assessment, inquiries and investigations serve no real purpose, the circular said, adding, "Such inquiries often don't result in identification of beneficiaries and only tend to harass the employers and establishments."