Is prop trading legal in India? What the RBI and SEBI pages say

This page sets out what pages from two Indian regulators say about sending money abroad and about the securities market, and lists what they leave open for a trader who pays a foreign prop firm and receives payouts from it. It gives no verdict. It cites no court ruling, and no ruling from a regulator, on prop-firm evaluations or payouts.

What SEBI says about its role

The Securities and Exchange Board of India says it was established as a statutory body in 1992. Its page describes the Board's basic functions as protecting the interests of investors in securities, promoting the development of the securities market and regulating it.

The page does not mention foreign firms, simulated trading or proprietary trading, so this page draws no conclusion on whether SEBI's remit reaches a firm that sells simulated evaluations from outside India.

What the RBI says about sending money abroad

The Reserve Bank's Master Direction on the Liberalised Remittance Scheme says Authorised Dealers may freely allow remittances by resident individuals up to USD 250,000 per financial year (April to March) for any permitted current or capital account transaction, or a combination of both. The Scheme is not available to corporates, partnership firms, HUFs, trusts and similar entities.

The Direction says that transactions not otherwise permissible under FEMA, and remittances in the nature of margins or margin calls to overseas exchanges or an overseas counterparty, are not allowed under the Scheme.

The Reserve Bank's FAQ on the Scheme lists the remittances the facility is not available for. They include remittances for a purpose prohibited under Schedule I or restricted under Schedule II of the Current Account Transactions Rules, 2000, for margins or margin calls to overseas exchanges or an overseas counterparty, and for trading in foreign exchange abroad.

Form A2, the bank and the remitter

A resident individual remitting under the Scheme furnishes Form A2 for the purchase of foreign exchange and must provide a Permanent Account Number (PAN). According to the FAQ, the Authorised Dealer is guided by the nature of the transaction as declared on Form A2, and the ultimate responsibility for complying with the FEMA rules lies with the person remitting.

What these pages leave open

The pages above are about money sent out of India and about the securities market. They do not say whether a fee paid to a foreign prop firm is a current account transaction, which purpose a bank would record for it, or whether it falls under one of the excluded categories. The FAQ's list of current account purposes ends with any other current account transaction not covered under the definition of current account in FEMA 1999, so that list is not a closed one.

This page also cites nothing on how a payout received from a foreign firm is treated under FEMA, or how it is taxed or reported. Questions to put to an adviser:

• Which category and purpose will my bank record for a fee paid to a foreign prop firm, and will it accept the payment?
• How is a payout received in crypto treated under FEMA and for income tax, compared with a payout received by bank transfer?
• Is GST relevant to a payout from a foreign firm?
• Which records should I keep for each fee and each payout?

The FEMA text and the CBIC circulars

The text of the Foreign Exchange Management Act, 1999 and the CBIC page of GST circulars are linked under further reading for your adviser. This page states nothing about what either of them contains.

Before you pay a foreign firm

1. 1Ask your Authorised Dealer bank whether it will process a payment to the firm, and which purpose it will record.
2. 2Keep a record of every fee you pay: the date, the amount, the exchange rate and the bank's reference.
3. 3Keep a record of every payout you receive: the date, the amount, the method, the exchange rate and the credit reference.
4. 4Give both records to a chartered accountant before you file a return, and ask how the payouts are classified and reported.

This page is general information, not legal, tax or financial advice, and it is not a ruling on any firm. The pages cited were read on 5 October 2026 and the rules change, so check the current text with a qualified adviser before acting.