Interesting but risky strategy as your brother may be asked by the tax man to explain the provenance of the funds. That said, happy to see creative solutions.
tax was collected by the exchange as part of the transaction expense and they have done their KYC/AML on verified account. Safe so far.
You are wrong, no tax was collect exchange, When Income Tax Officer ask from your brother, from where he is getting Bitcoin.
Then he will not have any answer because it will be violation of FEMA.
That is why encashing BTC in Indian exchange after limit is very dangerous.
Exchanging 3-4 BTC in a year may be not a problem but doing regularly and transfer funds to Bank account without paying a tax is very risky. For Income tax officer it will be like Online income for your brother and your brother stealing tax from government.