When hearing someone sneeze

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يَرْحَمُكَ اللَّهُ

“May Allah have mercy on you”.

The person sneezing should then reply

يَهْدِيكُمُ اللَّهُ وَيُصْلِحُ بَالَكُمْ

“May Allah keep you on hidayat (guidance) and make proper your condition.

(Mishkat, Bukhari)
If the sneezing person is a woman, the reply is with a kasrah (zer) on the kaaf.

If the sneezing person dose not recite “Alhamdulillaah” then it is not necessary to reply but if he does say so then it is waajib reply.

If the sneezing person has flu or any other difficulty which results in repeated sneezes then it is not necessary to reply after the third time.

(Mishkat)
To regard the sneeze as a bad omen: One should not take or see anything as bad omen as it is stated as being Shirk in the hadith.

(Hisnul Hasin)