The usage of induction hardening in the industry has increased in the last years due to its efficiency and repeatability. Induction hardening produces a hard martensitic layer on the specimen surface, which is accompanied by the generation of compressive residual stresses in the hardened case and tensile stresses in the untreated core. Residual stresses generated by induction hardening greatly impact on fatigue performance, as they act as crack growth retardants. In this work, a multiphysical coupled finite element model is developed to simulate induction hardening and compute the final residual stress state of the specimens along the microstructural transformations and hardness evolution. The impact of the transformation induced plasticity strain in the stress-state of the specimen during the process is also studied. The experimental validation shows that considering the transformation induced plasticity in induction hardening simulations improves the residual stress predictions, concluding that this effect should be included to achieve good residual stress predictions, especially in the subsurface region.