LONDON (REUTERS) - British Finance Minister Rishi Sunak hit back on Thursday (April 7) at what he called "smears" about his multi-millionaire Indian wife over her tax status, saying that she paid every penny she owed in Britain.

The row over Ms Akshata Murthy's tax status comes as Britons face the most severe hit to living standards since at least the 1950s, including a rise in taxes brought in by Mr Sunak to help pay for the country's recovery from the coronavirus pandemic.

Ms Murthy is the daughter of Mr Narayana Murthy, the billionaire co-founder of IT services company Infosys. She chose to hold non-domiciled status, which means she does not pay tax in Britain on her earnings abroad.

In an interview with The Sun newspaper, Mr Sunak defended his wife.

He said Ms Murthy, who owns about 0.93 per cent of Infosys, loved her homeland and should not have to sever ties simply because she was married to him.

She ultimately planned to return to India to look after her parents, he said.

"I would hope that most fair-minded people would understand, though I appreciate that it is a confusing situation that she is from another country."

Mr Sunak has been touted as a leading possible successor to Prime Minister Boris Johnson, who himself has suffered widespread criticism over parties at Downing Street during Covid-19 lockdowns.

But his personal poll ratings have plunged as he faces challenges on many fronts, with public finances stretched thin and the tax burden due to reach its highest since the 1940s.

He has also faced criticism this week for donating more than 100,000 pounds (S$177,790) to Winchester College, his former private school whose annual fees for pupils is more than 43,000 pounds.

His spokesman said it was just one of the couple's many philanthropic donations.

Every single penny

Ms Murthy's spokesman confirmed on Wednesday - the day that social security contributions rose for British workers and employers - that she was treated as non-domiciled for UK tax purposes, meaning she would not pay taxes in Britain on dividends from the Indian business.

"Every single penny that she earns in the UK she pays UK taxes on, of course she does," Mr Sunak told the paper. "And every penny that she earns internationally, for example in India, she would pay the full taxes on that.

"But what it comes down to is, my wife was born in India, raised in India. Her family home is in India, she obviously has a very close connection. She has investments and a career independent of me."

Non-domiciled status exempts more than 75,000 mostly foreign nationals in Britain from tax on overseas income and has been a target for tax campaigners as it overwhelmingly benefits the very rich.

Opposition parties have said what Ms Murthy had done is legal, but questioned whether it was morally right given the tax rises Mr Sunak was raising from the British public.

Mr Sunak said opponents were using the wealth of his wife and father-in-law to attack him, and it was wrong to target family members who were not elected politicians.

"To attempt to smear him, to smear my wife to get at me, is awful, right?" he said.