The government is considering a revamp of the income tax structure on equities to boost investor sentiment, television channel CNBC Awaaz reported, citing sources. The existing long term capital gains (LTCG) tax, the securities transaction tax (STT) and dividend distribution tax (DTT) are under review, the report said. This comes in the wake of a sharp cut in corporate tax rates last month. The Sensex was up 600 points in afternoon trade.

News agency IANS also reported that a bonanza is in the offing for the stock markets as the Prime Minister's Office (PMO) and the Finance Ministry are working on measures which may include dividend distribution tax (DDT) being scrapped.

In Budget 2018, long term capital gains on equities including equity mutual funds were made taxable. Equity investments sold before one year attracted LTCG tax at 10% if the gains in a financial year is above ?1 lakh.

Securities transaction tax (STT) is a tax levied at the time of purchase and sale of securities listed on stock exchanges in India. This tax came into effect from 1 October 2004. The rate of STT differs based on the type of security traded. For instance, while buying or selling an equity share (delivery-based), purchaser and seller both need to pay 0.1% of share value as STT.

Dividends paid by a domestic company is subject to dividend distribution tax (DDT) at 15%. The effective rate is 20.35%, including a surcharge and education cess.

Press Trust of India, citing sources, had earlier reported that the task force on direct tax code (DTC) has recommended abolishing dividend distribution tax (DDT) with a view to promote investment.

In recent months, the government has taken a lot of measures to lift domestic growth, which fell to a six-year low in June quarter. Corporate tax rates have been lowered from 30% to 22% and new manufacturing companies will have to pay an even lower corporate tax rate of 15%.

The government also cut the minimum alternate tax rate to 15% from 18.5% for companies that continue to avail exemptions and incentives.

The government also rolled back an increase in surcharge introduced in the July budget on capital gains made by individuals and other entities from sale of equity.