8. Interest on securities.—The tax shall be payable by an assessee under the head "Interest on securities" in respect of the interest receivable by him on any security of the [Central Government] or of a [State] Government, or on debentures or other securities for money issued by or on behalf of a local authority or a company:

[Provided that no income-tax shall be payable under this section by the assessee [in respect of any reasonable sum expended by him for the purpose of realizing such interest]] [or in respect of any interest payable on money borrowed for the purpose of investment in the securities by the assessee except interest chargeable under this Act which is payable without [the taxable territories], not being interest on a loan issued for public subscription before the 1st day of April, 1938, unless in respect of interest which is so chargeable tax has been paid or deducted under section 18, or unless there is a person in [the taxable territories] who may be appointed an agent under section 43 in respect of such interest]:

Provided [further] that no income-tax shall be payable on the interest receivable on any security of the [Central Government] issued or declared to be income-tax free:

Provided further that the income-tax payable on the interest receivable on any security of a [State] Government issued income-tax free shall be payable by the [State] Government.

[Explanation.—In the case of a banking company,—

(a) the amount which bears to the aggregate of its expenses as are admissible under sub-section (2) of section 10, other than under clauses (iii), (vi), (vi-a), (vi-b), (vii), (viii), (xi), (xii), (xiii) and (xiv) thereof, the same proportion as the gross receipts from interest on securities (inclusive of tax deducted at source) chargeable to tax under this section bears to the gross receipts from all sources which are included in the profit and loss account of the company, shall be deemed to be the sum reasonably expended by it for the purposes of realizing such interest; and the amount for which allowance is admissible under sub-section (2) of section 10 shall be reduced correspondingly; and

(b) money borrowed shall include moneys received by way of deposits; and that amount which bears to the amount of interest payable on moneys borrowed the same proportion as the gross receipts from interest on securities (inclusive of tax deducted at source) chargeable to tax under this section bears to the gross receipts from all sources which are included in the profit and loss account of the company, shall be deemed to be interest payable on money borrowed for the purpose of investment in the securities by the assessee, and the amount of such interest for which allowance is due under sub-section (2) of section 10 shall be reduced correspondingly.]

[As amended up to date]