The Indian government has implemented a reduction to the corporate income tax rate for domestic firms from 25-30% to 22%.
Corporate income tax is currently charged at 25% for companies which report a turnover of less than 4bn rupees ($57m), and at 30% for larger firms.
The surprise announcement was absent from this year's federal budget, and is aimed at kick-starting a slowing economy.
Foreign investors' interest income will now be subject to the higher surcharge of 25% to 37%, with the new tax reductions applicable to Indian-based companies only.
Additional rate reductions will apply to industry and particularly manufacturing firms.