TDS deduction for conract work

As per the income tax Act, It is mandatory for any employer (regardless of status) to deduct tax at source if the taxable salary is more than the basic exemption limit. There is no limit about the number of employee. The provision is applicable even if there is only 1 employee.
You are most likely to receive a notice from the TDS Cell if you fail to comply with the same.

You should apply for TAN.

Yes, You should apply for TAN. If you are making payment more than exemption limit then you are liable to deduct TDS as per rules. It is not based on turnover.

No, Tax will not applicable to wife. As per rules surrender of PAN is must after death of the person. But in that case legal heirs of the deceased person have to file all pending ITR & pay tax (if any). After that Legal heirs of deceased person can apply to AO for cancellation of PAN.