Introduction
In India, businesses often confuse the Legal Entity Identifier (LEI) with their Permanent Account Number (PAN). While both are unique identification codes issued to entities, their purposes, usage, and issuing authorities are entirely different. This article explains the difference between LEI and PAN, and why both are essential for your business today.
What is a PAN?
PAN (Permanent Account Number) is:
- A 10-character alphanumeric code issued by the Income Tax Department of India
- Unique to each individual or entity for tax identification and filing purposes
- Mandatory for all financial transactions related to tax, such as opening bank accounts, filing returns, and paying GST
Example: AABCF1234G
What is an LEI?
LEI (Legal Entity Identifier) is:
- A 20-character alphanumeric code issued by accredited Local Operating Units (LOUs) under the Global Legal Entity Identifier Foundation (GLEIF)
- Used to identify legal entities in global financial transactions
- Mandatory for entities engaged in trading securities, derivatives, or forex, and for certain large value payments as per RBI and SEBI regulations
Example: 529900T8BM49AURSDO55
Key Differences Between PAN and LEI
| Feature | PAN | LEI |
|---|---|---|
| Purpose | Tax identification within India | Global identification in financial markets |
| Issued By | Income Tax Department (India) | Accredited LOUs under GLEIF |
| Format | 10-character alphanumeric | 20-character alphanumeric |
| Validity | Lifetime (unless changes in details) | Valid for 1 year, renewable annually |
| Usage | Tax filing, GST, banking KYC | Securities trading, derivatives, large-value transactions |
| Regulatory Requirement | Income Tax Act | RBI & SEBI regulations |
Why Does Your Business Need Both?
✅ PAN:
Without a PAN, your business cannot file taxes, open bank accounts, or register for GST in India. It is your entity’s primary tax identity number.
✅ LEI:
Without an LEI, your business cannot:
- Trade in securities or derivatives
- Participate in certain forex transactions
- Comply with RBI’s large corporate borrower reporting
Both are equally essential for different regulatory and operational purposes.
When to Use PAN vs LEI?
- Opening a bank account: PAN
- Filing income tax returns: PAN
- Trading securities or derivatives: LEI + PAN
- Large value interbank transactions (Rs. 50 crore+): LEI + PAN
Common Misconceptions
“I have PAN, so I don’t need LEI.”
Wrong. PAN is only for tax purposes, while LEI is for financial market compliance.
“LEI replaces PAN.”
Wrong. Both are independent and necessary for different compliance requirements.
How to Obtain an LEI?
The process is simple:
- Submit your entity details online
- Upload required documents (Certificate of Incorporation, PAN, GST, etc.)
- Make payment securely
- Receive your LEI within 1-2 working days
At MyLEI, we ensure fast, compliant, and affordable LEI registration for your business.
Conclusion
While PAN is essential for taxation, an LEI is mandatory for financial market compliance and global recognition. Both identifiers serve different but equally important roles in your business operations. Ensure your entity is equipped with both to avoid compliance risks.
Need to register your LEI today? Apply online with MyLEI for a quick and seamless process.
