diff --git a/fineract-e2e-tests-runner/src/test/resources/features/Loan.feature b/fineract-e2e-tests-runner/src/test/resources/features/Loan.feature
index f72490351..f19e0bb93 100644
--- a/fineract-e2e-tests-runner/src/test/resources/features/Loan.feature
+++ b/fineract-e2e-tests-runner/src/test/resources/features/Loan.feature
@@ -6933,3 +6933,145 @@ Feature: Loan
       | 10 April 2024    | Accrual                | 1.72    | 0.0       | 1.72     | 0.0  | 0.0       | 0.0          | false    | false    |
     Then Loan status will be "CLOSED_OBLIGATIONS_MET"
     Then Loan has 0 outstanding amount
+
+#  @TestRailId:C_1
+  Scenario: Verify repayment schedule and accrual transactions created after penalty is added for paid off loan on maturity date
+    When Admin sets the business date to "08 May 2024"
+    And Admin creates a client with random data
+    When Admin creates a fully customized loan with the following data:
+      | LoanProduct                                              | submitted on date | with Principal | ANNUAL interest rate % | interest type     | interest calculation period | amortization type  | loanTermFrequency | loanTermFrequencyType | repaymentEvery | repaymentFrequencyType | numberOfRepayments | graceOnPrincipalPayment | graceOnInterestPayment | interest free period | Payment strategy            |
+      | LP2_ADV_PYMNT_INTEREST_DAILY_EMI_360_30_ACCRUAL_ACTIVITY | 08 May 2024       | 1000           | 12.19                  | DECLINING_BALANCE | DAILY                       | EQUAL_INSTALLMENTS | 3                 | MONTHS                | 1              | MONTHS                 | 3                  | 0                       | 0                      | 0                    | ADVANCED_PAYMENT_ALLOCATION |
+    And Admin successfully approves the loan on "08 May 2024" with "1000" amount and expected disbursement date on "08 May 2024"
+    When Admin successfully disburse the loan on "08 May 2024" with "1000" EUR transaction amount
+    Then Loan Repayment schedule has 3 periods, with the following data for periods:
+      | Nr | Days | Date             | Paid date | Balance of loan | Principal due | Interest | Fees | Penalties | Due      | Paid | In advance | Late | Outstanding |
+      |    |      | 08 May 2024      |           | 1000.0          |               |          | 0.0  |           | 0.0      | 0.0  |            |      |             |
+      | 1  | 31   | 08 June 2024     |           | 670.03          | 329.97        | 10.16    | 0.0  | 0.0       | 340.13   | 0.0  | 0.0        | 0.0  | 340.13      |
+      | 2  | 30   | 08 July 2024     |           | 336.71          | 333.32        |  6.81    | 0.0  | 0.0       | 340.13   | 0.0  | 0.0        | 0.0  | 340.13      |
+      | 3  | 31   | 08 August 2024   |           | 0.0             | 336.71        |  3.42    | 0.0  | 0.0       | 340.13   | 0.0  | 0.0        | 0.0  | 340.13      |
+    And Loan Repayment schedule has the following data in Total row:
+      | Principal due | Interest | Fees | Penalties | Due     | Paid | In advance | Late | Outstanding |
+      | 1000.0        | 20.39    | 0.0  | 0.0       | 1020.39 | 0.0  | 0.0        | 0.0  | 1020.39     |
+    And Loan Transactions tab has the following data:
+      | Transaction date | Transaction Type | Amount  | Principal | Interest | Fees | Penalties | Loan Balance | Reverted | Replayed |
+      | 08 May 2024      | Disbursement     | 1000.0  | 0.0       | 0.0      | 0.0  | 0.0       | 1000.0       | false    | false    |
+    When Admin sets the business date to "08 June 2024"
+    And Customer makes "AUTOPAY" repayment on "08 June 2024" with 340.13 EUR transaction amount
+    When Admin sets the business date to "08 July 2024"
+    And Customer makes "AUTOPAY" repayment on "08 July 2024" with 340.13 EUR transaction amount
+    When Admin sets the business date to "08 August 2024"
+    And Admin runs inline COB job for Loan
+    And Customer makes "AUTOPAY" repayment on "08 August 2024" with 340.13 EUR transaction amount
+    Then Loan Repayment schedule has 3 periods, with the following data for periods:
+      | Nr | Days | Date             | Paid date      | Balance of loan | Principal due | Interest | Fees | Penalties | Due      | Paid   | In advance | Late | Outstanding |
+      |    |      | 08 May 2024      |                | 1000.0          |               |          | 0.0  |           | 0.0      | 0.0    |            |      |             |
+      | 1  | 31   | 08 June 2024     | 08 June 2024   | 670.03          | 329.97        | 10.16    | 0.0  | 0.0       | 340.13   | 340.13 | 0.0        | 0.0  | 0.0         |
+      | 2  | 30   | 08 July 2024     | 08 July 2024   | 336.71          | 333.32        |  6.81    | 0.0  | 0.0       | 340.13   | 340.13 | 0.0        | 0.0  | 0.0         |
+      | 3  | 31   | 08 August 2024   | 08 August 2024 | 0.0             | 336.71        |  3.42    | 0.0  | 0.0       | 340.13   | 340.13 | 0.0        | 0.0  | 0.0         |
+    And Loan Repayment schedule has the following data in Total row:
+      | Principal due | Interest | Fees | Penalties | Due     | Paid    | In advance | Late | Outstanding |
+      | 1000.0        | 20.39    | 0.0  | 0.0       | 1020.39 | 1020.39 | 0.0        | 0.0  | 0.0         |
+    And Loan Transactions tab has the following data:
+      | Transaction date | Transaction Type | Amount  | Principal | Interest | Fees | Penalties | Loan Balance | Reverted | Replayed |
+      | 08 May 2024      | Disbursement     | 1000.0  | 0.0       | 0.0      | 0.0  | 0.0       | 1000.0       | false    | false    |
+      | 08 June 2024     | Repayment        | 340.13  | 329.97    | 10.16    | 0.0  | 0.0       | 670.03       | false    | false    |
+      | 08 June 2024     | Accrual Activity | 10.16   | 0.0       | 10.16    | 0.0  | 0.0       | 0.0          | false    | false    |
+      | 08 July 2024     | Repayment        | 340.13  | 333.32    | 6.81     | 0.0  | 0.0       | 336.71       | false    | false    |
+      | 08 July 2024     | Accrual Activity | 6.81    | 0.0       | 6.81     | 0.0  | 0.0       | 0.0          | false    | false    |
+      | 07 August 2024   | Accrual          | 20.28   | 0.0       | 20.28    | 0.0  | 0.0       | 0.0          | false    | false    |
+      | 08 August 2024   | Repayment        | 340.13  | 336.71    | 3.42     | 0.0  | 0.0       | 0.0          | false    | false    |
+      | 08 August 2024   | Accrual          | 0.11    | 0.0       | 0.11     | 0.0  | 0.0       | 0.0          | false    | false    |
+      | 08 August 2024   | Accrual Activity | 3.42    | 0.0       | 3.42     | 0.0  | 0.0       | 0.0          | false    | false    |
+# --- add penalty for paid off loan on maturity date ---#
+    When Admin adds "LOAN_NSF_FEE" due date charge with "08 August 2024" due date and 2.8 EUR transaction amount
+    Then Loan Repayment schedule has 3 periods, with the following data for periods:
+      | Nr | Days | Date             | Paid date      | Balance of loan | Principal due | Interest | Fees | Penalties | Due      | Paid   | In advance | Late | Outstanding |
+      |    |      | 08 May 2024      |                | 1000.0          |               |          | 0.0  |           | 0.0      | 0.0    |            |      |             |
+      | 1  | 31   | 08 June 2024     | 08 June 2024   | 670.03          | 329.97        | 10.16    | 0.0  | 0.0       | 340.13   | 340.13 | 0.0        | 0.0  | 0.0         |
+      | 2  | 30   | 08 July 2024     | 08 July 2024   | 336.71          | 333.32        |  6.81    | 0.0  | 0.0       | 340.13   | 340.13 | 0.0        | 0.0  | 0.0         |
+      | 3  | 31   | 08 August 2024   |                | 0.0             | 336.71        |  3.42    | 0.0  | 2.8       | 342.93   | 340.13 | 0.0        | 0.0  | 2.8         |
+    And Loan Repayment schedule has the following data in Total row:
+      | Principal due | Interest | Fees | Penalties | Due     | Paid    | In advance | Late | Outstanding |
+      | 1000.0        | 20.39    | 0.0  | 2.8       | 1023.19 | 1020.39 | 0.0        | 0.0  | 2.8         |
+    And Loan Transactions tab has the following data:
+      | Transaction date | Transaction Type | Amount  | Principal | Interest | Fees | Penalties | Loan Balance | Reverted | Replayed |
+      | 08 May 2024      | Disbursement     | 1000.0  | 0.0       | 0.0      | 0.0  | 0.0       | 1000.0       | false    | false    |
+      | 08 June 2024     | Repayment        | 340.13  | 329.97    | 10.16    | 0.0  | 0.0       | 670.03       | false    | false    |
+      | 08 June 2024     | Accrual Activity | 10.16   | 0.0       | 10.16    | 0.0  | 0.0       | 0.0          | false    | false    |
+      | 08 July 2024     | Repayment        | 340.13  | 333.32    | 6.81     | 0.0  | 0.0       | 336.71       | false    | false    |
+      | 08 July 2024     | Accrual Activity | 6.81    | 0.0       | 6.81     | 0.0  | 0.0       | 0.0          | false    | false    |
+      | 07 August 2024   | Accrual          | 20.28   | 0.0       | 20.28    | 0.0  | 0.0       | 0.0          | false    | false    |
+      | 08 August 2024   | Repayment        | 340.13  | 336.71    | 3.42     | 0.0  | 0.0       | 0.0          | false    | false    |
+      | 08 August 2024   | Accrual          | 0.11    | 0.0       | 0.11     | 0.0  | 0.0       | 0.0          | false    | false    |
+    When Admin sets the business date to "09 August 2024"
+    And Admin runs inline COB job for Loan
+    Then Loan Repayment schedule has 3 periods, with the following data for periods:
+      | Nr | Days | Date             | Paid date      | Balance of loan | Principal due | Interest | Fees | Penalties | Due      | Paid   | In advance | Late | Outstanding |
+      |    |      | 08 May 2024      |                | 1000.0          |               |          | 0.0  |           | 0.0      | 0.0    |            |      |             |
+      | 1  | 31   | 08 June 2024     | 08 June 2024   | 670.03          | 329.97        | 10.16    | 0.0  | 0.0       | 340.13   | 340.13 | 0.0        | 0.0  | 0.0         |
+      | 2  | 30   | 08 July 2024     | 08 July 2024   | 336.71          | 333.32        |  6.81    | 0.0  | 0.0       | 340.13   | 340.13 | 0.0        | 0.0  | 0.0         |
+      | 3  | 31   | 08 August 2024   |                | 0.0             | 336.71        |  3.42    | 0.0  | 2.8       | 342.93   | 340.13 | 0.0        | 0.0  | 2.8         |
+    And Loan Repayment schedule has the following data in Total row:
+      | Principal due | Interest | Fees | Penalties | Due     | Paid    | In advance | Late | Outstanding |
+      | 1000.0        | 20.39    | 0.0  | 2.8       | 1023.19 | 1020.39 | 0.0        | 0.0  | 2.8         |
+    And Loan Transactions tab has the following data:
+      | Transaction date | Transaction Type | Amount  | Principal | Interest | Fees | Penalties | Loan Balance | Reverted | Replayed |
+      | 08 May 2024      | Disbursement     | 1000.0  | 0.0       | 0.0      | 0.0  | 0.0       | 1000.0       | false    | false    |
+      | 08 June 2024     | Repayment        | 340.13  | 329.97    | 10.16    | 0.0  | 0.0       | 670.03       | false    | false    |
+      | 08 June 2024     | Accrual Activity | 10.16   | 0.0       | 10.16    | 0.0  | 0.0       | 0.0          | false    | false    |
+      | 08 July 2024     | Repayment        | 340.13  | 333.32    | 6.81     | 0.0  | 0.0       | 336.71       | false    | false    |
+      | 08 July 2024     | Accrual Activity | 6.81    | 0.0       | 6.81     | 0.0  | 0.0       | 0.0          | false    | false    |
+      | 07 August 2024   | Accrual          | 20.28   | 0.0       | 20.28    | 0.0  | 0.0       | 0.0          | false    | false    |
+      | 08 August 2024   | Repayment        | 340.13  | 336.71    | 3.42     | 0.0  | 0.0       | 0.0          | false    | false    |
+      | 08 August 2024   | Accrual          | 0.11    | 0.0       | 0.11     | 0.0  | 0.0       | 0.0          | false    | false    |
+      | 08 August 2024   | Accrual          | 2.8     | 0.0       | 0.0      | 0.0  | 2.8       | 0.0          | false    | false    |
+      | 08 August 2024   | Accrual Activity | 6.22    | 0.0       | 3.42     | 0.0  | 2.8       | 0.0          | false    | false    |
+    When Admin sets the business date to "15 August 2024"
+    And Admin runs inline COB job for Loan
+    And Customer makes "AUTOPAY" repayment on "15 August 2024" with 2.8 EUR transaction amount
+    Then Loan Repayment schedule has 3 periods, with the following data for periods:
+      | Nr | Days | Date             | Paid date      | Balance of loan | Principal due | Interest | Fees | Penalties | Due      | Paid   | In advance | Late | Outstanding |
+      |    |      | 08 May 2024      |                | 1000.0          |               |          | 0.0  |           | 0.0      | 0.0    |            |      |             |
+      | 1  | 31   | 08 June 2024     | 08 June 2024   | 670.03          | 329.97        | 10.16    | 0.0  | 0.0       | 340.13   | 340.13 | 0.0        | 0.0  | 0.0         |
+      | 2  | 30   | 08 July 2024     | 08 July 2024   | 336.71          | 333.32        |  6.81    | 0.0  | 0.0       | 340.13   | 340.13 | 0.0        | 0.0  | 0.0         |
+      | 3  | 31   | 08 August 2024   | 15 August 2024 | 0.0             | 336.71        |  3.42    | 0.0  | 2.8       | 342.93   | 342.93 | 0.0        | 2.8  | 0.0         |
+    And Loan Repayment schedule has the following data in Total row:
+      | Principal due | Interest | Fees | Penalties | Due     | Paid    | In advance | Late | Outstanding |
+      | 1000.0        | 20.39    | 0.0  | 2.8       | 1023.19 | 1023.19 | 0.0        | 2.8  | 0.0         |
+    And Loan Transactions tab has the following data:
+      | Transaction date | Transaction Type | Amount  | Principal | Interest | Fees | Penalties | Loan Balance | Reverted | Replayed |
+      | 08 May 2024      | Disbursement     | 1000.0  | 0.0       | 0.0      | 0.0  | 0.0       | 1000.0       | false    | false    |
+      | 08 June 2024     | Repayment        | 340.13  | 329.97    | 10.16    | 0.0  | 0.0       | 670.03       | false    | false    |
+      | 08 June 2024     | Accrual Activity | 10.16   | 0.0       | 10.16    | 0.0  | 0.0       | 0.0          | false    | false    |
+      | 08 July 2024     | Repayment        | 340.13  | 333.32    | 6.81     | 0.0  | 0.0       | 336.71       | false    | false    |
+      | 08 July 2024     | Accrual Activity | 6.81    | 0.0       | 6.81     | 0.0  | 0.0       | 0.0          | false    | false    |
+      | 07 August 2024   | Accrual          | 20.28   | 0.0       | 20.28    | 0.0  | 0.0       | 0.0          | false    | false    |
+      | 08 August 2024   | Repayment        | 340.13  | 336.71    | 3.42     | 0.0  | 0.0       | 0.0          | false    | false    |
+      | 08 August 2024   | Accrual          | 0.11    | 0.0       | 0.11     | 0.0  | 0.0       | 0.0          | false    | false    |
+      | 08 August 2024   | Accrual          | 2.8     | 0.0       | 0.0      | 0.0  | 2.8       | 0.0          | false    | false    |
+      | 08 August 2024   | Accrual Activity | 6.22    | 0.0       | 3.42     | 0.0  | 2.8       | 0.0          | false    | false    |
+      | 15 August 2024   | Repayment        | 2.8     | 0.0       | 0.0      | 0.0  | 2.8       | 0.0          | false    | false    |
+    When Admin sets the business date to "16 August 2024"
+    And Admin runs inline COB job for Loan
+    Then Loan Repayment schedule has 3 periods, with the following data for periods:
+      | Nr | Days | Date             | Paid date      | Balance of loan | Principal due | Interest | Fees | Penalties | Due      | Paid   | In advance | Late | Outstanding |
+      |    |      | 08 May 2024      |                | 1000.0          |               |          | 0.0  |           | 0.0      | 0.0    |            |      |             |
+      | 1  | 31   | 08 June 2024     | 08 June 2024   | 670.03          | 329.97        | 10.16    | 0.0  | 0.0       | 340.13   | 340.13 | 0.0        | 0.0  | 0.0         |
+      | 2  | 30   | 08 July 2024     | 08 July 2024   | 336.71          | 333.32        |  6.81    | 0.0  | 0.0       | 340.13   | 340.13 | 0.0        | 0.0  | 0.0         |
+      | 3  | 31   | 08 August 2024   | 15 August 2024 | 0.0             | 336.71        |  3.42    | 0.0  | 2.8       | 342.93   | 342.93 | 0.0        | 2.8  | 0.0         |
+    And Loan Repayment schedule has the following data in Total row:
+      | Principal due | Interest | Fees | Penalties | Due     | Paid    | In advance | Late | Outstanding |
+      | 1000.0        | 20.39    | 0.0  | 2.8       | 1023.19 | 1023.19 | 0.0        | 2.8  | 0.0         |
+    And Loan Transactions tab has the following data:
+      | Transaction date | Transaction Type | Amount  | Principal | Interest | Fees | Penalties | Loan Balance | Reverted | Replayed |
+      | 08 May 2024      | Disbursement     | 1000.0  | 0.0       | 0.0      | 0.0  | 0.0       | 1000.0       | false    | false    |
+      | 08 June 2024     | Repayment        | 340.13  | 329.97    | 10.16    | 0.0  | 0.0       | 670.03       | false    | false    |
+      | 08 June 2024     | Accrual Activity | 10.16   | 0.0       | 10.16    | 0.0  | 0.0       | 0.0          | false    | false    |
+      | 08 July 2024     | Repayment        | 340.13  | 333.32    | 6.81     | 0.0  | 0.0       | 336.71       | false    | false    |
+      | 08 July 2024     | Accrual Activity | 6.81    | 0.0       | 6.81     | 0.0  | 0.0       | 0.0          | false    | false    |
+      | 07 August 2024   | Accrual          | 20.28   | 0.0       | 20.28    | 0.0  | 0.0       | 0.0          | false    | false    |
+      | 08 August 2024   | Repayment        | 340.13  | 336.71    | 3.42     | 0.0  | 0.0       | 0.0          | false    | false    |
+      | 08 August 2024   | Accrual          | 0.11    | 0.0       | 0.11     | 0.0  | 0.0       | 0.0          | false    | false    |
+      | 08 August 2024   | Accrual          | 2.8     | 0.0       | 0.0      | 0.0  | 2.8       | 0.0          | false    | false    |
+      | 08 August 2024   | Accrual Activity | 6.22    | 0.0       | 3.42     | 0.0  | 2.8       | 0.0          | false    | false    |
+      | 15 August 2024   | Repayment        | 2.8     | 0.0       | 0.0      | 0.0  | 2.8       | 0.0          | false    | false    |
diff --git a/fineract-provider/src/main/java/org/apache/fineract/portfolio/loanaccount/service/LoanAccrualsProcessingServiceImpl.java b/fineract-provider/src/main/java/org/apache/fineract/portfolio/loanaccount/service/LoanAccrualsProcessingServiceImpl.java
index 6dd45dcec..976835c2a 100644
--- a/fineract-provider/src/main/java/org/apache/fineract/portfolio/loanaccount/service/LoanAccrualsProcessingServiceImpl.java
+++ b/fineract-provider/src/main/java/org/apache/fineract/portfolio/loanaccount/service/LoanAccrualsProcessingServiceImpl.java
@@ -358,7 +358,7 @@ public class LoanAccrualsProcessingServiceImpl implements LoanAccrualsProcessing
         if (progressiveAccrual && accruedTill != null && !DateUtils.isAfter(tillDate, accruedTill)) {
             if (isFinal) {
                 reverseTransactionsAfter(existingAccruals, accrualDate, addJournal);
-            } else if (existingAccruals.stream().anyMatch(t -> !t.isReversed() && !DateUtils.isBefore(t.getDateOf(), accrualDate))) {
+            } else if (isExistAccrualAfterDate(existingAccruals, accrualDate) && hasNoActiveChargeOnDate(loan, accrualDate)) {
                 return;
             }
         }
@@ -445,6 +445,14 @@ public class LoanAccrualsProcessingServiceImpl implements LoanAccrualsProcessing
         }
     }
 
+    private boolean isExistAccrualAfterDate(List<LoanTransaction> existingAccruals, LocalDate accrualDate) {
+        return existingAccruals.stream().anyMatch(t -> !t.isReversed() && !DateUtils.isBefore(t.getDateOf(), accrualDate));
+    }
+
+    private boolean hasNoActiveChargeOnDate(Loan loan, LocalDate accrualDate) {
+        return loan.getLoanCharges(t -> t.isActive() && DateUtils.isEqual(t.getDueDate(), accrualDate)).isEmpty();
+    }
+
     private AccrualPeriodsData calculateAccrualAmounts(@NotNull final Loan loan, @NotNull final LocalDate tillDate, final boolean periodic,
             final boolean isFinal, final boolean chargeOnDueDate) {
         final LoanProductRelatedDetail productDetail = loan.getLoanProductRelatedDetail();