At 2:26 pm, the Sensex traded 2,122.88 points - or 5.88 per cent - higher at 38,216.35 while the Nifty was at 11,355.55 , up 650.75 points - or 6.08 per cent - from the previous close.

Top percentage gainers on the 50-scrip index at the time were Hero MotoCorp, Maruti Suzuki, Eicher Motors, IndusInd Bank, Bharat Petroleum, and State Bank of India (SBI), trading with huge gains of between 11.75 per cent and 14.57 per cent.

The new tax structure is effective from April 1, 2019, and new companies formed from October 1 will attract a base tax rate of 15 per cent, instead of 30 per cent, the Finance Minister said.

HDFC Bank, Reliance Industries, ICICI Bank and Kotak Bank were the top contributors to the surge in Sensex.

In a press briefing ahead of the 37th meeting of the GST Council, the Finance Minister said the total revenue foregone for reduction in corporate tax rate and other measures is estimated at Rs 1.45 lakh crore per year.

Analysts said that the measures to lower the corporate tax outgo on domestic companies pushed the markets higher.

"It is a very positive move that we expected from budget... Most high tax-paying companies, private sector as well as public sector, will benefit from the corporate tax measures," AK Prabhakar, head of research at IDBI Capital Market Services, told NDTV.

"Companies like ITC, Nestle, Colgate-Palmolive and auto makers, and even profitable PSU companies which pay high taxes, are likely to be among beneficiaries of these moves," he added.

The government has in the past four weeks announced a number of measures aimed at boosting the economy, which grew at the slowest pace in six years in the quarter ended June.