Chancellor Rishi Sunak's wife, Akshata Murty, has claimed non-domicile status for UK tax purposes.
The Independent reported that Ms Murty used the status to save on tax payments when her husband was already chancellor.
The status means that she does not legally have to pay UK tax on foreign income although she is still liable to pay tax on income made in this country.
The newspaper claims the status could have saved the Chancellor’s wife millions of pounds in tax on foreign earnings.
However, a spokeswoman for Ms Murty assured that she pays all tax that is legally required in the UK.
The non-dom status is lawful and it is understood Ms Murty pays foreign taxes on her overseas income
Labour's shadow economic secretary to the Treasury, Tulip Siddiq called on the Chancellor to "explain how much he and his family have saved on their own tax bill".
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She said: "The Chancellor has imposed tax hike after tax hike on the British people.
“It is staggering that, at the same time, his family may have been benefitting from tax reduction schemes.
“This is yet another example of the Tories thinking it is one rule for them, another for everyone else.
“Rishi Sunak must now urgently explain how much he and his family have saved on their own tax bill at the same time he was putting taxes up for millions of working families and choosing to leave them £2,620 a year worse off.”
The story came on the same day as an increase in National Insurance contributions, in an effort to raise further funds for health and social care.
Ms Murty, a fashion designer, is reported to have a 0.9% stake in her billionaire father's company Infosys which has grown to be one of India's biggest firms.
Her spokeswoman said: "Akshata Murty is a citizen of India, the country of her birth and parent’s home.
“India does not allow its citizens to hold the citizenship of another country simultaneously.
“So, according to British law, Ms Murty is treated as non-domiciled for UK tax purposes.
“She has always and will continue to pay UK taxes on all her UK income.”
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It is understood that Mr Sunak informed the Cabinet Office of his wife's tax status as part of his declaration of interests in 2018.
Business Secretary Kwasi Kwarteng defended her tax status to Sky News.
He said: "I'm totally comfortable with people having businesses, people operating what they do as private citizens, I'm completely comfortable about that.
"I'm not an expert on her financial arrangements but I think absolutely people have a right to pursue their own business arrangements.
"I've just come here to say very clearly that I think her tax affairs are a matter for her."
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