New Delhi (CNN Business) India is slashing taxes on companies and manufacturers to try and revive its struggling economy.

Profits made by Indian companies will now be taxed at a rate of 22%, down from 30%, as long as they don't apply for other incentives or exemptions, Finance Minister Nirmala Sitharaman announced on Friday. New manufacturing firms incorporated after October this year will be taxed at 15% instead of 25%, as long as they start production before March 2023, she added.

The announcement sent Indian stock markets surging, with the country's benchmark index, the Sensex, up more than 5% by Friday afternoon. India's currency, the rupee, also rose around 0.5% against the US dollar.

The tax cuts will result in a 1.45 trillion rupee ($20.4 billion) drop in government revenues every year, according to Sitharaman.

"The idea is [that] economic buoyancy will itself generate enough reasons for better revenue generation," she said.

Read More