India's top court has issued a landmark verdict creating a third gender category that allows transgendered people to identify themselves as such on official documents.

Activists say it will give relief to millions of people who face discrimination in India's deeply conservative society.

The supreme court directed the federal and state governments to include transgendered people in all welfare programmes for the poor, including education, healthcare and jobs to help them overcome social and economic challenges.

Before Tuesday's judgment, transgendered Indians had to identify themselves as male or female in all official documents.

The court noted that it was the right of every human being to choose their gender while granting rights to those who identify themselves as neither male nor female.

"All documents will now have a third category marked transgender. This verdict has come as a great relief for all of us. Today I am proud to be an Indian," said Laxmi Tripathi, a transgender activist who had petitioned the court.

The court's decision will apply to individuals who have acquired the physical characteristics of the opposite sex or present themselves in a way that does not correspond with their sex at birth.

"The spirit of the [Indian] constitution is to provide equal opportunity to every citizen to grow and attain their potential, irrespective of caste, religion or gender," the court said in its order.

Recently, India's election commission for the first time allowed a third gender choice – "other" – on voter registration forms. The change was made in time for the national elections currently taking place.

Some 28,000 voters registered themselves in that category. Overall, there are an estimated 3 million transgender people in India.

Many transgendered people in India earn a living by singing and dancing at weddings and births, but others must resort to begging or prostitution.