A fake government office has been discovered in northern India that collected taxes, provided civic services and even handed out birth and death certificates, a report says.

An office was set up outside Jhansi town in Uttar Pradesh state and 20 people were employed to carry out jobs such as street sweeping.

Officials believe the operation originally started as a scam to collect fees from residents in return for one municipal janitor.

But the leader of the operation, named as Shyam Valmiki, allegedly branched out, opening a functioning office that employed a team of janitors.

"He later seems to have decided to carry on with the office as it did not appear to be a loss-making proposition," an unnamed police officer was quoted by Times of India as saying.

The scam only came to light after some employees complained about salary problems to superiors in the actual government department, the report said.