Egypt watered down a capital gains tax on stock market profits it announced last week, after the country's bourse recorded its biggest daily drop in almost a year on Sunday.

Egypt is keen to encourage investment but also wants to find additional sources of revenue after more than three years of economic and political turmoil since a popular uprising ousted Hosni Mubarak in 2011.

Finance Minister Hany Dimian announced the new tax on dividends and share market transactions on Thursday , when the main index closed down 3.5 percent. After the two-day market break, it fell a further 4.2 percent on Sunday.

The finance ministry had initially set a tax-free limit of 10,000 Egyptian pounds ($1,400) on annual cash dividend payments for individuals resident in Egypt.

Financial Supervisory Authority head Sherif Samy told Reuters late on Sunday the tax threshold would be raised to 15,000 pounds.

"What exactly the tax will look like has led to confusion among market participants in general," said Ahmed Hafez, co-head of equity research at HC Brokerage in Cairo.

Egypt will exempt dividends paid in shares from the 10-percent gains tax.

Egypt voted last week in presidential elections.

Abdel Fattah Al-Sisi, the general who toppled the country's first freely elected leader - Islamist Mohamed Mursi - following mass protests, has taken more than 90 percent of the vote according to provisional results. - Reuters