Praise be to Allah.
Clasping the hands when praying means placing the right hand over the left when standing. This is one of the sunnahs of prayer, and is proven from the Prophet (peace and blessings of Allaah be upon him). This is the view of the majority of scholars.
Ibn Qudaamah (may Allaah have mercy on him) said:
As for placing the right hand on the left during prayer, it is one of the sunnahs of prayer according to the majority of scholars. That was narrated from ‘Ali, Abu Hurayrah, al-Nakha’i, Abu Majlaz, Sa’eed ibn Jubayr, al-Thawri, al-Shaafa’i and ashaab al-ra’i. It was also narrated by Ibn al-Mundhir from Maalik. End quote.
The scholars of the Standing Committee said:
Clasping the hands in prayer means placing the right hand over the left hand, and letting the arms hang means letting them hang down by the sides. It is proven that the Prophet (peace and blessings of Allaah be upon him) placed his right hand on his left during prayer, when standing to recite Qur’aan, and when standing after rising from bowing. This is according to the report narrated by Ahmad and Muslim from Waa’il ibn Hajar (may Allaah be pleased with him), that he saw the Prophet (peace and blessings of Allaah be upon him) raising his hands and saying takbeer when he started to pray, then he wrapped his cloak around himself, then he placed his right hand on his left. When he wanted to bow, he brought out his hands, then he raised them and said takbeer, then he bowed. When he said “Sami’a Allaahu liman hamidah (Allaah hears the one who praises Him)” he raised his hands, and when he prostrated, he prostrated between his hands.” According to a report narrated by Ahmad and Abu Dawood he said: Then he placed his right hand on his left hand, wrist and forearm. According to a report narrated by Abu Haazim from Sahl ibn Sa’d al-Saa’idi: The people were commanded to place the right hand on the left forearm when praying. Abu Haazim said: All I know is that he attributed it to the Prophet (peace and blessings of Allaah be upon him). Narrated by Ahmad and al-Bukhaari.
There is no hadeeth to prove that the Prophet (peace and blessings of Allaah be upon him) let his arms hang by his sides when standing during prayer. End quote.
Fataawa al-Lajnah al-Daa’imah.
As for where the hands are to be placed, it is on the chest.
Ibn Khuzaymah (479) narrated that Waa’il ibn Hujr (may Allaah be pleased with him) said: I prayed with the Messenger of Allaah (peace and blessings of Allaah be upon him) and he placed his right hand over his left hand on his chest.
Classed as saheeh by al-Albaani in Tahqeeq Saheeh Ibn Khuzaymah.
Al-Albaani said in Sifat Salaat al-Nabi (peace and blessings of Allaah be upon him) (p. 69):
Placing them (the hands) on the chest is what is established in the Sunnah, and doing otherwise is either weak (based on weak evidence) or has no basis. End quote.
Al-Sindi said in Haashiyat Ibn Maajah:
Just as it is Sunnah to clasp the hands and not let them hang by one’s sides, it is proven that they are to be placed in the chest, not elsewhere. As for the hadeeth “It is Sunnah to place one hand over the other beneath the navel when praying”, the scholars are agreed that it is da’eef (weak). End quote.
Shaykh Ibn ‘Uthaymeen said:
This method – i.e., placing the hands beneath the navel – is what is prescribed according to the well known view of the madhhab, and there is a hadeeth narrated from ‘Ali which says “It is Sunnah to place the right hand over the left beneath the navel when praying.” It was narrated by Abu Dawood and classed as da’eef (weak) by al-Nawawi, Ibn Hajar and others.
Some scholars are of the view that the hands may be placed above the navel. This was stated by Imam Ahmad.
Other scholars are of the view that they should be placed on the chest, and this is the most correct view. There is some debate concerning the evidence for that but the apparent meaning of the hadeeth of Sahl ibn Sa’d which is in al-Bukhaari supports the idea that the hands should be placed on the chest. The best report concerning this issue, even though there is some debate concenring it, is the hadeeth of Waa’il ibn Hujr who said that the Prophet (peace and blessings of Allaah be upon him) used to put (his hands) on his chest.
Al-Sharh al-Mumti’ (3/36, 37)
As for the manner in which the hands are placed, there are two ways:
1-Placing the right hand on top of the left hand, wrist and forearm
2-Clasping the right hand over the left
For the evidence on that, please see the answer to question no 41675 .
And Allaah knows best.