Rishi Sunak said his spouse Akshata Murty – who is estimated to be worth hundreds of millions of pounds – has done nothing wrong in choosing a financial arrangement that means she is not legally obliged to pay tax in Britain on foreign income.
It comes as Mr Sunak's allies have reportedly accused No 10 of being responsible for the briefings.
He has blamed Labour for the “awful” smears against his family.
Unnamed allies of the Chancellor reportedly claimed the Prime Minister’s office were behind the leaks.
Chancellor of the Exchequer Rishi Sunak alongside his wife Akshata Murthy
Ian West
Rishi Sunak has been targeted this week as protesters wore masks of the Chancellor outside the Treasury
Yui Mok
The allegations are strongly denied by No 10 and No 11.
A No 10 spokeswoman said: “It is categorically untrue that No 10 is behind the briefings.
“The Prime Minister and Chancellor are united.”
Mr Sunak said Ms Murty was entitled to use the non-dom arrangement as she is an Indian citizen and plans to move back to her home country to care for her parents.
The fashion-designer daughter of a billionaire married the Chancellor in 2009 before he became an MP.
She is reported to hold a 0.91 percent stake in Infosys, an IT business founded by her dad.
With Ms Murty born in India and her dad also from the south Asian country, Government rules allow her to list India, rather than the UK, as her permanent residence, meaning different tax rules on foreign earnings apply.
The Chancellor said it was “unpleasant” to read attacks on his wife “especially when she hasn’t done anything wrong”.
He added in an interview with The Sun: “She hasn’t broken any rules. She’s followed the letter of the law."
Mr Sunak said his partner “pays full UK tax on every penny that she earns here in the same way that she pays full international tax on every penny that she earns internationally”.
Asked during the interview whether he thought his family were victims of a “Labour smear campaign”, Mr Sunak said he did.
But Sir Keir Starmer's party hit back, saying: “The Chancellor would do better to look a little closer to home.
“It’s clear that No 10 are the ones briefing against Rishi Sunak and, after his failure to tackle the cost-of-living crisis, you can understand why.”
Rishi Sunak unveiling his Spring Statement, for which he is under intense scrutiny
UK PARLIAMENT/JESSICA TAYLOR
Health Secretary Sajid Javid, Prime Minister Boris Johnson and Chancellor of the Exchequer Rishi Sunak
Frank Augstein
Sir Keir said on Thursday that Mr Sunak could be guilty of “breathtaking hypocrisy” if his wife was reducing her own tax bill as the No 11 incumbent increases National Insurance for millions of Brits.
Liberal Democrat Treasury spokeswoman Christine Jardine urged the Government to close the “loophole” that allows spouses to claim non-dom status while MPs have to be treated as tax residents.
Prime Minister Boris Johnson sidestepped questions on Ms Murty’s tax situation, saying it is important to keep families out of politics “if you possibly can”.
Ms Murty's non-dom status means her permanent home is considered to be outside the UK despite the Sunaks living in Downing Street.
She pays an annual levy of £30,000 to the UK Government to keep her non-dom status, her spokeswoman confirmed.
It will automatically cease once she has resided in Britain for 15 years, with her set to reach that milestone in 2028.