Book of the Two Festivals (Eids) starts today.
Volume 2, Book 15, Number 767:
Narrated ‘Abdullah bin Umar:
Umar bought a silk cloak from the market, took it to Allah’s Apostle and said, “O Allah’s Apostle! Take it and adorn yourself with it during the ‘Id and when the delegations visit you.” Allah’s Apostle (p.b.u.h) replied, “This dress is for those who have no share (in the Hereafter).” After a long period Allah’s Apostle (p.b.u.h) sent to Umar a cloak of silk brocade. Umar came to Allah’s Apostle (p.b.u.h) with the cloak and said, “O Allah’s Apostle! You said that this dress was for those who had no share (in the Hereafter); yet you have sent me this cloak.” Allah’s Apostle said to him, “Sell it and fulfill your needs by it.”
This Hadith shows us that the Prophet (SAW) refused to wear that new cloak – not because it was new, but because it was made of silk. Silk is not allowed for men to wear.
Coming to the next point, should we wear ‘new’ clothes on Eid, or the ‘best’ clothes? Well, in many narrations, we get to know that the Prophet (SAW) used to wear his best clothes on Eid – not necessarily new.
It was narrated that Jaabir (may Allaah be pleased with him) said: The Prophet (peace and blessings of Allaah be upon him) had a cloak which he would wear on the two Eids and on Fridays.
Saheeh Ibn Khuzaymah, 1756.
Al-Bayhaqi narrated with a saheeh isnaad (authentic chain of narrators) that Ibn ‘Umar used to wear his best clothes on Eid.
Imam an-Nasafi says in Kanz ad-Daqa’iq:
The Sunnah is to wear one’s best clothes on Eid.
If one can afford new clothes, then he may wear them. Nothing wrong about that as long as we don’t make a fuss about it every other Eid. Getting my point? :P
P.S. wearing your best clothes is good. But going out like that is good for men only. Women should observe the proper rulings of hijaab and cover their zeenah (beauty) while going out. Eid or not.
Ibn `Uthaymeen in his Majmoo` Fatawa:
You should wear your best clothes – this is for men. With regard to women, they should not wear beautiful clothes when they go out to the Eid prayer-place, because the Prophet (peace and blessings of Allaah be upon him) said: “Let them go out looking decent” i.e., in regular clothes that are not fancy. It is haraam for them to go out wearing perfume and makeup.
Must read point no. 5 here.
Similar Hadith discussed here.