Forex trading is absolutely legal in India and is regulated by RBI and Sebi . The exchange was inaugurated by Sebi chairman and RBI dy governor on 20 th sept 2010.
Trading is permitted in currency derivatives futures and options in four pairs usd inr, Euro inr , jpy inr and gbp inr and any Indian can take exposure in usd inr for as minimum as 1000 $ or as maximum as 15 mil us $ without any underlying exposure.
Margin on exposure is also very less and you can take exposure 25–40 times of your deposit. There is a securities transaction tax on shares, futures , commodities but no securities transaction tax on currency.
Sebi is considering permitting international pairs like usd/ euro etc soon.
you have to go through broker compulsorily or alternatively you can become yourself a broker.