Prop trading is popular in India, and its legal position is not settled by any rule written for it. What does exist are two sets of RBI rules that bear directly on it: the Alert List of unauthorised forex platforms, and the Liberalised Remittance Scheme that governs money sent abroad.

The RBI Alert List

The RBI publishes an Alert List of entities that are neither authorised to deal in foreign exchange under FEMA nor authorised to operate electronic trading platforms for forex. The version updated on 19 November 2025 includes these prop firms:

Prop Trading in India: Legality, LRS and Tax. The RBI Alert List; The Liberalised Remittance Scheme; If you go ahead anyway
What this guide covers: 3 key sections at a glance.
EntryName on the RBI Alert List
13FTMO
82Smart Prop Trader
83FundedNext

The RBI adds that an entity not appearing in the list should not be assumed to be authorised by the RBI. Several brokers are on the list too. Check the current Alert List yourself before dealing with any firm.

The Liberalised Remittance Scheme

Under the LRS, resident individuals may send up to USD 250,000 a financial year (April to March) abroad for permitted current and capital account purposes. The RBI’s own FAQ lists what the scheme does not cover, including:

  • “Remittance for trading in foreign exchange abroad.”
  • “Remittance from India for margins or margin calls to overseas exchanges / overseas counterparty.”

A prop challenge fee is not margin in the usual sense, and the RBI has not published a rule on prop fees. But the firm on the other side may be on the Alert List, and the activity being paid for is trading foreign exchange abroad. That is why we describe the position as untested, not as allowed.

Tax

Payouts received from a prop firm are money coming into your hands from abroad, and residents report their income to the Income Tax Department. How a payout is classified, for example as business income or income from other sources, depends on your facts. Keep records of every fee and payout. Our India forex tax guide covers the general rules.

If you go ahead anyway

  1. Check the firm against the current RBI Alert List.
  2. Read the RBI’s LRS FAQ and speak to your bank and a tax adviser about how a payment would be classified.
  3. Keep amounts small, and keep records of every payment, payout and message.
  4. Prefer practising on a free demo account until you understand the position for yourself.

This guide summarises official sources for general information. It is not legal or tax advice; for your own position, speak to a qualified adviser in your country.

What the Alert List is, and is not

The RBI’s Alert List names entities the RBI says are neither authorised to deal in foreign exchange under FEMA nor authorised to operate electronic trading platforms for forex. It also includes websites and platforms that appear to promote such entities. Two points are easy to miss:

  • The list is not complete. The RBI says an entity that does not appear on it should not be assumed to be authorised.
  • The list is updated over time, so a firm’s absence today is not a guarantee for tomorrow.

The RBI publishes a separate list of authorised electronic trading platforms. Checking both lists, rather than only the Alert List, gives the clearer picture.

What Indian residents can trade in India

Indian residents can trade currency derivatives on Indian exchanges through brokers registered with SEBI, in the currency pairs those exchanges list. This is the route the site-wide country note on FX Recap refers to. It is a different product from offshore prop firm challenges, but it is a regulated way to trade currencies from India.

Common situations, and how to think about them

SituationPoints to consider
A firm you like is on the Alert ListThe RBI has named it as not authorised; that is the strongest official signal available
A firm is not on the Alert ListNot a sign of authorisation; check the authorised ETP list too
Your bank declines a paymentBanks apply the RBI’s rules; do not route around a decline
Someone offers to pay the fee for youAn indirect route does not change the rules and adds fraud risk

Keeping records

If you have paid fees or received payouts in the past, keep the records: dates, amounts, currencies, the payment method and the firm’s statements. If questions ever arise from your bank or the tax authorities, clear records are the first thing an adviser will need.

Illustrative example: a careful decision

A trader in Pune finds that two firms recommended in an online group are both on the RBI Alert List. Instead of looking for a way round, they spend three months practising prop-style limits on a free demo and open an account with a SEBI-registered broker to trade listed currency derivatives. Their trading skills develop either way; their regulatory risk does not.

Our forex legality map covers India alongside other countries, and forex tax in India covers the tax side.

Before taking any step

  1. Check the firm on the RBI’s current Alert List and its list of authorised trading platforms.
  2. Read the RBI’s LRS FAQ on what remittances are excluded.
  3. Speak to your bank and a qualified adviser about your specific situation.
  4. Keep records of anything already paid or received.

The safest way to build prop-trading skills from India, in the meantime, is a free demo account using the same daily and maximum loss limits a prop firm would set. Our guides to the daily loss limit and position sizing show how to set those limits up.

For Indian readers, these guides cover the firms named on the RBI list and the wider position.

Frequently asked

Is prop trading legal in India?

No Indian rule names prop firm challenges, so the position is untested. But the RBI's Alert List of unauthorised forex platforms names FTMO, Smart Prop Trader and FundedNext, and the LRS excludes remittances for trading in foreign exchange abroad.

Is FTMO on the RBI Alert List?

Yes. The Alert List updated on 19 November 2025 names FTMO at entry 13, and FundedNext at entry 83.

Can I use the LRS to pay a prop firm?

The RBI has not published a rule on prop fees. Its LRS FAQ excludes remittances for trading in foreign exchange abroad and for margins or margin calls to overseas exchanges or counterparties, so speak to your bank and an adviser first.

Are prop firm payouts taxable in India?

Residents report their income to the Income Tax Department, and payouts are money received by you. How they are classified depends on your facts; keep records and take advice.

Does being off the RBI Alert List mean a firm is allowed in India?

No. The RBI says an entity that does not appear on the list should not be assumed to be authorised. Check its separate list of authorised electronic trading platforms as well.

What currency trading is permitted for Indian residents?

Currency derivatives on Indian exchanges, traded through SEBI-registered brokers, in the pairs those exchanges list.

What should I do if my bank declines a prop firm payment?

Do not route around it. Banks apply the RBI's rules, and an indirect payment does not change them. Take advice if you are unsure.