Rishi Sunak has defended his wife's tax-reducing status which could spare her from paying millions as a Tory blame game erupted over the leaks.
The Chancellor moaned that Labour was leading a smear campaign against his wife Akshata Murty, who holds non-domicile status which means she does not have to pay UK tax on overseas income.
It comes as the Mirror revealed that a firm founded by her father won £50m in taxpayer-funded contracts.
Ms Murty initially said she held the status automatically as she is an Indian citizen - an explanation questioned by critics.
But later she said said she pays £30,000-a-year to the UK Government to keep her non-dom status. Her spokeswoman said she pays tax on all income due in the UK and international taxes on her international income.
Allies of Mr Sunak are said to have pointed the finger at No 10 over the leaks, after reports of tensions between Boris Johnson and his Chancellor over spending. No10 and No11 have denied the claims.
The details of Ms Murty's tax status emerged on the same day Mr Sunak hiked national insurance for millions.
"It's all coming from No 10," the source told The Telegraph.
"Rishi's the only credible show in town. Ever since he sat down from the Spring Statement, it's been one thing after the other. I don't think it's in anyone's interest other than the Prime Minister's."
A Tory MP said: "No10 have been gunning for him for a while and undermining him with colleagues."
But No10 rejected the allegation. A spokeswoman said: "It is categorically untrue that No 10 is behind the briefings. The Prime Minister and Chancellor are united."
A Treasury source said: "Neither Rishi nor anyone in his team believes this is coming from No10."
Boris Johnson dodged questions on the issue on Thursday, saying it is important to keep families out of politics "if you possibly can".
Mr Sunak broke his silence on the growing row, telling The Sun that every penny owed in the UK is paid.
“Every single penny that she earns in the UK she pays UK taxes on, of course she does," he said.
“And every penny that she earns internationally, for example in India, she would pay the full taxes on that.
“That is how the system works for people like her who are international who have moved here.”
He said it wasn't fair to ask his wife to sever her ties with India, where she would eventually return to care for her parents.
He said "She loves her country. Like I love mine, I would never dream of giving up my British citizenship. And I imagine most people wouldn’t.”
Mr Sunak added: “To smear my wife to get at me is awful.”
Asked if he believed his family were victims of a Labour smear campaign, Mr Sunak replied: “Yeah.”
But a Labour source said: "The Chancellor would do better to look a little closer to home.
"It's clear that No10 are the ones briefing against Rishi Sunak and after his failure to tackle the cost of living crisis you can understand why."
Ms Murty, who married the Chancellor in 2009, is the daughter of an Indian billionaire N R Naranya Murty, who founded IT business Infosys.
She is reported to hold a 0.91% stake in Infosys, worth an estimated £11.6 million per year. She would not pay UK tax at a rate of 39.35% on her dividends under the arrangement.
With Ms Murty born in India and her father also from the south Asian country, UK Government rules allow her to list India, rather than the UK, as her permanent residence, meaning different tax rules on foreign earnings apply.
This means her permanent home is considered to be outside the UK despite the Sunaks living in Downing Street.
Non-dom status is legal and can save an individual from paying UK tax on income from dividends from foreign investments, rental payments on property overseas or bank interest.
It also allows an individual to avoid inheritance tax in the UK.
The status automatically ceases after someone has lived in Britain for 15 years, with Ms Murty expected to reach that milestone in 2028.
Labour accused the Chancellor's wife of "taking advantage" of her decision to claim non-domicile status to avoid paying taxes.
Emily Thornberry told BBC Radio 4's Today programme: "In the end, we have somebody who's been living here for eight years, raising her children here, living at ... Downing Street in accommodation provided by the taxpayer and aspiring to be the wife of the next Prime Minister, and yet she says that she isn't a permanent resident of this country."
She said the ministerial code warns that the financial status of ministers' spouses are relevant because "there can be a conflict of interest".
Ms Thornberry said it is a "complete red herring what passport somebody has", adding: "What's relevant is that she's of the 0.1% of the population who have positively chosen to say that although they're living here, they're not living here permanently and taking advantage of that decision in order to not pay as much tax."
Senior Tory Tobias Ellwood called for the rules around non-dom status to be overhauled.
"In my view, they are out of date, they do need to be reviewed," he said.
