I know the money isn't taxable when I send it to my parents
Yes this is right
they send it to their nephew as it will count as a gift
No this is incorrect Yes. Refer to Income Tax guide on relations exempt under gifts.
Gifts received from relatives are not charged to tax. Relative for this purpose means:
(a) Spouse of the individual;
(b) Brother or sister of the individual;
(c) Brother or sister of the spouse of the individual;
(d) Brother or sister of either of the parents of the individual;
(e) Any lineal ascendant or descendent of the individual;
(f) Any lineal ascendant or descendent of the spouse of the individual;
(g) Spouse of the persons referred to in (b) to (f).
Friend is not a relative as defined in the above list and hence, gift received from friends will be charged to tax (if other criteria of taxing gift are satisfied).
Even if you assumption were true, i.e. your dad gives it to his brother and his brother gives it to his son ...
But if this is done sequentially and soon one after the other, is it taxable?
The intent is important. One can do it immediately or after few years; if the intent is established that this was done to evade taxes, then you will have to pay the tax as well as penalty.