Yes, it is permitted to celebrate one's birthday so long nothing is done that is forbidden. Celebrating the birth of the Prophet (saw) has been permitted as it is rooted in the era of the Prophet (saw) who commented on his own birth saying:
"I am the du'a of my father Ibrahim (as), I am the good tidings of Isa (as), and I am the son of the two slaughtered ones (Ismail and Abdullah)."
The Prophet's (saw) uncle and enemy of Islam, Abu Lahab, set his slave Thuwaiba free being happy for the birth of the Prophet (saw). Abu Lahab's punishment is made light every Monday as a reward of his act. (Bukhari)
The Prophet (saw) was asked about fasting on a Monday. He replied, "I was born on that day and wahi (revelation) began upon me on that day." (Mishkat)
The Prophet (saw) used to respect the day of his own birth. He used to thank Allah for that great favour and used to fast to respect that day. It is a requirement of the Quran to show respect on the birth of Prophet (saw). Allah says:
"Say, "In the bounty of Allah and in His mercy - in that let them celebrate; it is better than what they accumulate." (Qur'an 10:58)
And who is Allah's mercy:
" And We have not sent you, [O Muhammad], except as a mercy to the worlds." (Qur'an 21:107)
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