Besides the infamous NRI funding technique, don't forget these are legal ways of trading forex too (and would also help Indian retail traders to avoid using RBI's limited forex khazana)
1) Using REAL dollars earned in the online business (art/Music selling, website ad revenue, youtube AdSense earning or any other 101% legal non forex businesses)to fund your international forex trading account. Then make as much profits as you want on your own hard earned money. Then bring profits finally to India via any method of withdrawal as provided by your international broker. File tax under challan 280 and mention capital gains or your other 101% legit online business as the income source
2) If Forex trading is the only online business that you do, then always use an intermediary online payment processor between your local Indian bank and international forex broker for deposits and withdrawals like webmoney and skrill. At the time of filing tax return however, you have to take a risk of telling lie about the source of income. But since your bank or RBI will not have any records to prove for what purpose you deposited money in webmoney, you can safely lie here and just mention capital gains
Lastly, in case you are unfortunate enough to not have any NRI friend/relative or any online business located outside India that pay you in dollars, then you just can't deposit directly from your Indian local bank for international forex margin trading. You'll then be penalized as per RBI regulations and FEMA act.
Hope this helps to clear up the mist a bit more
Happy international currency trading my dear fellow Indians!:thumb: