Praise be to Allah.

Firstly:

The festival mentioned in the question is a festival of the Hindus, and others such as the Sikhs, Buddhists and so on have followed them in that. It is called the Festival of Holi or the Festival of Colours, because people colour themselves and others with different colours until their appearance becomes very repugnant, and the coloured clothes are thrown away after that, because it is very difficult to clean them and restore them to their original condition. The festival is also called a spring festival, because it comes at the beginning of the spring and, more precisely, when the moon is full. Before the full moon, they light bonfires, because they believe that by doing so they are driving away evil spirits. Some of them burn parts of their houses with coals from that fire to drive evil away from them, and they keep the ashes of the fire to ward off sickness from their bodies.

It is originally a religious festival, and those who celebrate it – the Hindus – believe that on those days the evil gods were destroyed by the good gods! This is part of their religion, which is based on myths and idol-worship. Along with the playing with colours, dancing and singing, sweets are distributed and they congratulate one another by saying “Happy Holi”.

In English, there is a similar-sounding word “holy”. Some researchers think that the meaning of the word, for the Hindus, is burning, because they believe that the fires put an end to evil and evil people. Whatever the case, this is the festival referred to in the question.

For more information on that, please see al-Mawsoo‘ah al-‘Arabiyyah al-‘Aalamiyyah.

Secondly:

The saheeh texts indicate that it is haraam to participate in these religious festivals of the disbelievers. The four madhhabs and others are unanimously agreed on that.

This emphatic prohibition is because of their disbelief in Allah, and because these festivals are symbols of that disbelief. So how about if they are hostile and aggressive towards the Muslims, and transgress against their rights? This makes it even more appropriate to be averse towards them, their festivals and their religion altogether.

Among the texts which are indicative of this prohibition are the following:

1.

Allah, may He be exalted, states that one of the characteristics of the believers is that they do not witness vanity or falsehood. According to some of the commentators, this refers to festivals that are based on falsehood.

Allah, may He be exalted, says (interpretation of the meaning):

“And those who will not witness vanity [falsehood], but when they pass near senseless play, pass by with dignity”

[al-Furqaan 25:72].

Ibn Katheer (may Allah have mercy on him) said:

Abu’l-‘Aaliyah, Taawoos, Muhammad ibn Sireen, ad-Dahhaak, ar-Rabee‘ ibn Anas and others said: This refers to the  festivals of the polytheists.

Tafseer Ibn Katheer (6/130).

This sentence is not simply describing how people of dignity behave; rather it is intended to give an example that should be followed, which indicates that it is haraam to witness such falsehood.

2.

 The Prophet (blessings and peace of Allah be upon him) stated that whoever imitates the disbelievers is one of them, which implies that it is definitely prohibited to imitate them.

It was narrated that Ibn ‘Umar said: The Messenger of Allah (sa) (blessings and peace of Allah be upon him) said: “Whoever imitates a people is one of them.”

Narrated by Abu Dawood (4031); classed as saheeh by al-Albaani in Saheeh Abi Dawood.

Shaykh al-Islam Ibn Taymiyah (may Allah have mercy on him) said:

The least that can be said concerning this hadith is that it is prohibited to imitate them, even though the apparent meaning may imply that the one who imitates them becomes a disbeliever, as in the words, “And whoever is an ally to them among you - then indeed, he is [one] of them” [al-Maa’idah 5:51].

Iqtidaa’ Siraat al-Mustaqeem (p. 83).

This is sufficient evidence to indicate that it is haraam for a Muslim to participate in the festivals of the Hindus and other disbelievers. The Muslim should not allow his family or children to play with colours on those days, because of what we have quoted above of the evidence that it is forbidden to participate to even the slightest extent in the celebrations and religious festivals of the disbelievers, let alone what those festivals involve of free mixing, music and dancing. If that was a festival celebrate by some Muslims, it would not be permissible to participate in it, because it would be regarded as an innovation and because of what it involves of haraam actions – so how about if it is one of the religious festivals of the disbelievers?!

Shaykh al-Islam Ibn Taymiyah (may Allah have mercy on him) said:

It is not permissible for the Muslims to imitate them in any of their festivals that are unique to them, whether in terms of food, clothing, bathing, lighting fires, temporarily refraining from some customs or rituals, or anything else. It is not permissible to give a feast or to give gifts, or to sell anything that may be used for the purpose of that celebration, or to allow children and others to join in the games that are played on those festivals, or to wear adornments.

Majmoo‘ al-Fataawa (25/329).

For more information on the emphatic prohibition on participating in those festivals and the like, please see the answers to the following questions:

947, 97014, 3325, 10213, 5219, 1027, 26804, 59905, 135119.

You will find a number of these questions and others concerning the festivals of the disbelievers and related issues here: en/cat/234

And Allah knows best.