TDS default on resident payments triggers 30% expense disallowance, subject to later payment and payee compliance relief. Non-compliance with TDS obligations on payments to residents results in disallowance of 30% of the expenditure where tax is not deducted or, after deduction, is not deposited by the due date. The disallowed amount is allowed in the year tax is actually paid. If the recipient has filed the return, included the income and paid the tax, the payer is not treated as an assessee in default and the tax is deemed deducted and paid on the return-filing date, subject to Form 26A. Depreciation on capitalised interest is not denied for TDS default on such interest.